Another New Zealand Interest Rate Cut – Currency Thoughts
Another New Zealand Interest Rate Cut
May 28, 2025
The reduction to 3.25% from 3.50% in policy interest rate of the Reserve Bank of New Zealand returns such to its lowest level since October 2022 and brings the cumulative decline to 225 basis points from a peak of 5.50% sustained from September 2023 until August 2024. The 5-1 vote to cut the rate today included one dissent in favor of leaving the OCR at 3.5%, but an extensive statement explaining the decision explicitly “projects that the OCR will decline further, supporting the recovery in economic activity.” Tariffs pose downside risks to growth, which last year was already weak. Although consumer price inflation last quarter accelerated to 2.5%, that lies within the 1-3% target range, and officials expect in-target inflation to continue. Nonetheless, the outlook surrounding the varied possible tariff scenarios is fraught with uncertainty. A rate hike at the next review in July does not seem likely.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission,
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