RBNZ Lowers Cash Rate by 50 Basis Points: A Look at the Implications for New Zealand’s Economy

The Reserve Bank of New Zealand (RBNZ) has reduced its cash rate by 50 basis points, bringing it down to 3.75%. This move was fully anticipated by all 32 participants in a Bloomberg survey, reflecting the widespread expectation of a rate cut to support the economy.

Sheep grazing peacefully in the lush green pastures of New Zealand.

Economic Pressures Lead to Continued Easing

With the economy facing challenges like falling GDP and rising unemployment, the RBNZ has been easing its policy to help stimulate growth. Since August 2024, the bank has cut rates by a total of 175 basis points, bringing inflation back to target.

Signs of Recovery

Early indicators suggest that the easing measures are beginning to support economic activity, but the central bank is cautious about future cuts.

Slowing Pace of Cuts Ahead

The RBNZ has indicated that future rate cuts will slow, with projections showing the cash rate could fall to 3.45% by Q2 2025 and 3.14% by Q4 2025, with a possible low of 3.10%.

Looking Forward

Governor Adrian Orr noted that the RBNZ is planning smaller cuts moving forward, likely in two 25 basis point steps by mid-2025, signaling a more gradual approach to easing. The bank will continue to monitor economic recovery closely.