Wellington

New Zealand’s central bank has eased monetary policy by lowering the official cash rate (OCR) by 25 basis points to 5.25% due to a decline in inflation. The Reserve Bank of New Zealand (RBNZ) stated that annual consumer price inflation is now approaching the Monetary Policy Committee’s (MPC) target range of 1% to 3%. The RBNZ highlighted that various indicators, including inflation expectations, firms’ pricing behavior, and core inflation measures, are aligning with low and stable inflation.

Economic growth in New Zealand remains below trend, with inflation easing across advanced economies. Some central banks have also started reducing interest rates. The RBNZ expects consumer price inflation in New Zealand to stay close to the target mid-point in the near future.

The RBNZ noted that any further easing of monetary policy will depend on the MPC’s confidence that inflation expectations are anchored around the 2% target and that pricing behavior supports a low inflation environment. Following the OCR reduction, major retail banks in New Zealand cut their mortgage rates.

The OCR had been raised since late 2021 in response to high inflation, reaching a peak of 5.5% in May last year. However, recent data indicates slowing economic growth, with declining inflation and rising unemployment.