Reserve Bank of New Zealand
In summary from the statement: The Monetary Policy Committee (MPC) has reduced the Official Cash Rate (OCR) by 50 basis points to 4.25%.
- Inflation: Annual inflation has decreased and is near the 1–3% target midpoint. Inflation expectations and core inflation are also aligning with this midpoint. Further OCR reductions are anticipated early next year if economic conditions remain on track.
- Economic Conditions: Economic activity in New Zealand is subdued, with output below potential and excess capacity reducing inflation pressures. Falling import prices and stabilized domestic price and wage behaviors are contributing to lower inflation.
- Future Outlook: Economic growth is expected to recover in 2025, driven by lower interest rates. Employment growth will likely remain weak until mid-2025, with some ongoing financial stress for households.
- Global Factors: Global growth is forecasted to stay subdued, with geopolitical and policy uncertainties potentially increasing economic and inflation volatility.
- Policy Stance: The MPC emphasized that maintaining inflation near the midpoint of the target band ensures flexibility to address future inflationary shocks.
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The background to this meeting are the cuts in August and October:
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August: The RBNZ reduced the Official Cash Rate (OCR) by 25 basis points, bringing it down to 5.25%. This marked the first rate cut since March 2020, signaling a shift from the previous tightening stance.
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October 2024: In response to a weakening economy and subdued inflation, the RBNZ implemented a more substantial cut of 50 basis points, lowering the OCR to 4.75%. This decision aimed to provide additional stimulus to the economy.
This article was written by Eamonn Sheridan at www.forexlive.com.
