Reserve Bank of New Zealand cuts cash rate by 50bps

Interest rates are on the way down in New Zealand, where the central bank has cut 50 basis points from the official cash rate.

Reserve Bank of New Zealand (RBNZ) governor Adrian Orr took the OCR to 4.75 per cent on Wednesday.

“Economic activity in New Zealand is subdued, in part due to restrictive monetary policy,” he said.

“Business investment and consumer spending have been weak, and employment conditions continue to soften.

“The New Zealand economy is now in a position of excess capacity, encouraging price- and wage-setting to adjust to a low-inflation economy.

“The (RBNZ’s monetary policy) committee agreed that it is appropriate to cut the OCR by 50 basis points to achieve and maintain low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates, and the exchange rate.”

The decision was largely priced in by markets and tipped by most bank economists, with Kiwibank taking the rare step of slashing its floating rate a day before the decision.

Like much of the world, NZ has suffered through high inflation following the COVID-19 pandemic.

With headline consumers price index (CPI) inflation at 3.3 per cent and almost back in RBNZ’s target band of one to three per cent, the central bank has opted to start cutting.

Mr Orr said he believed the CPI had lowered beyond that 3.3 per cent figure, last measured in July, with fresh figures due next week.