Reserve Bank of New Zealand Cuts Interest Rate to 3.25% Amid External Pressures and Cautious Economic Recovery

The Reserve Bank of New Zealand (RBNZ) announced on Wednesday a widely expected 25 basis point cut to its official cash rate, bringing it down to 3.25%.

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The move is part of the central bank’s broader efforts to support the domestic economic recovery and respond to escalating global challenges.
Five out of six members of the Monetary Policy Committee voted in favor of the cut,
while one member preferred to keep the rate unchanged.

This marks the third rate cut in 2025, reflecting signs of a gradual recovery in the New Zealand economy following
a slowdown period that was accompanied by a rise in inflation to 2.5% in the first quarter of the year.

In its monetary policy statement, the bank affirmed that inflation remains within the target range of 1% to 3%,
with expectations that it will return to the midpoint of 2% by 2026, despite a possible temporary increase to 2.7% in Q3 of this year.

The statement also highlighted that lower interest rates and high commodity prices are supporting the economic rebound.
However, the bank expressed concern about global trade tensions, especially U.S. tariffs,
which could negatively impact global demand and, in turn, New Zealand’s exports—particularly to Asian markets.

The governor noted that the Monetary Policy Committee currently holds no clear bias regarding future rate decisions,
emphasizing the bank’s readiness to respond to any domestic or international developments to maintain medium-term price stability.

Despite the near-unanimous vote for a cut, the presence of a dissenting view within the committee reflects ongoing debate
about the need for further monetary easing, especially amid growing uncertainty in the global economy.
This leaves the bank in a state of “alert but flexible” readiness for the period ahead.

Reserve Bank of New Zealand Cuts Interest Rate to 3.25%

Reserve Bank of New Zealand Cuts Interest Rate to 3.25%

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