The Reserve Bank of New Zealand is expected to cut interest rates for the sixth consecutive time, indicating that monetary policy easing will not stop here
The Reserve Bank of New Zealand is expected to cut interest rates for the sixth consecutive time, possibly lowering the official cash rate by 25 basis points to 3.25%. The economic outlook has dimmed due to U.S. trade barriers, and the central bank has hinted at the possibility of continuing to ease monetary policy in the future. Economists predict that the OCR may fall below 3% and expect the OCR forecast for the end of 2025 to be adjusted to around 2.9%. Although recent trade tensions have eased, uncertainty will continue to suppress New Zealand's economic recovery
Zhitong Finance APP learned that due to the impact of U.S. trade barriers, the economic outlook is dimming. The Reserve Bank of New Zealand is set to announce a rate cut at its sixth consecutive meeting and hint at the possibility of further easing monetary policy in the future.
According to a survey of 23 economists, 22 predict that the Reserve Bank of New Zealand will lower the Official Cash Rate (OCR) by 25 basis points to 3.25% on Wednesday (Wellington time), while only 1 expects a cut of 50 basis points. The Monetary Policy Committee is likely to imply at least one more rate cut by forecasting that the OCR will fall below 3% this year.
Kelly Eckhold, Chief Economist at Westpac Bank in Auckland, stated: "We expect the Reserve Bank of New Zealand to lower its OCR forecast for the end of 2025 by about 20 basis points to around 2.9%. After this meeting, the central bank may maintain a data-dependent approach to further easing."
The Reserve Bank of New Zealand indicated last month that due to the downward risks to economic activity and inflation from U.S. tariff policies, there is room for further rate cuts. Although recent trade tensions have eased, ongoing uncertainty will continue to suppress New Zealand's recovery momentum from last year's recession.
The Reserve Bank of New Zealand will announce its decision at 2 PM local time on Wednesday, followed by a press conference with Governor Christian Hawkesby one hour later. The central bank will also update its economic forecasts to reflect its assessment of the impact of global trade turmoil on economic growth.
Wesley Tanuvasa, an economist at ASB Bank in Auckland, stated: "Although the tariff conflict has cooled, we still believe that the U.S.-China trade war will have a net negative impact on New Zealand's economy and inflation in the medium term. Significant uncertainty means the central bank wants to maintain policy flexibility, so we expect its statements on the monetary policy outlook to remain cautious and dependent on data and developments."
Employment Market Remains Stable
Recent data has shown mixed results. The unemployment rate remained unchanged at 5.1% in the first quarter, better than market expectations. Commodity prices remain strong, and inflation expectations have also risen.
Both economists and the central bank predict that the inflation rate will accelerate from the current 2.2% to the upper end of the central bank's target range of 1-3%, before slowing down again next year.
Meanwhile, the real estate market continues to be sluggish, business confidence is declining, and the tightening budget announced by the government last week is seen by the Treasury as creating conditions for further rate cuts.
Some economists predict that the Reserve Bank of New Zealand will lower the OCR to 2.5% this year, while the market generally believes that a cut to 2.75% is more likely.
"In the current environment, there is ample strategic adjustment space for policy-making," said Sharon Zollner, Chief Economist for New Zealand at ANZ Bank in Auckland. "We still expect the Reserve Bank of New Zealand to eventually lower the OCR to 2.5%, but we do not believe it will send such a clear signal at this stage."
