MNI BRIEF: RBNZ Cuts OCR 25bp To 3.25%

The Reserve Bank of New Zealand’s Monetary Policy Committee cut the Official Cash Rate by 25 basis points to 3.25% on Wednesday, citing significant spare capacity in the economy.

While a rate hold was considered, the quarter-point reduction was backed by a 5-1 majority on the committee. The move was largely anticipated. (See MNI RBNZ WATCH: MPC Set To Cut 25bp, Lean Into Future Data)

“The case for lowering the OCR to 3.25% highlighted that CPI inflation is in the target range and there is significant spare capacity in the economy," the MPC's statement noted. "Measures of core inflation and wage inflation have continued to decline. In addition, there is a weaker outlook for domestic activity and inflationary pressure relative to the February Statement, because of international developments.”

In its updated Monetary Policy Statement, the Bank lowered its projected OCR path by 20bp to 2.9% by December and forecast the unemployment rate to rise to 5.1% by year-end.