New Zealand Slashes Key Interest Rate By 50 Bps

(RTTNews) - The Reserve Bank of New Zealand reduced its benchmark interest rate by 50 basis points on Wednesday, as inflation moved close to the midpoint of the target range and economic output remains below its potential.

The Monetary Policy Committee governed by Adrian Orr decided to reduce the Official Cash Rate to 4.25 percent from 4.75 percent. The bank had reduced the rate by 50 basis points in October and 25 basis points in August.

"If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year," the bank said in a statement.

Policymakers expect economic growth to recover next year, as lower interest rates boost investment and other spending. However, employment growth is forecast to remain weak until mid-2025.

The MPC cautioned that exact speed and timing of the recovery is subject to uncertainty.

Inflation eased to the midpoint of the central bank's 1-3 percent target band. Moreover, inflation expectations came close to the target and core inflation is converging to the midpoint. Although the bank didn't provide a clear signal about the speed of future rate cuts when it lowered the overnight cash rates by 50 basis points today, it will deliver another 50 basis point cut at its February meeting, Capital Economics' economist Marcel Thieliant said.