The Reserve Bank of New Zealand’s Monetary Policy Committee voted 5–1 to lower the Official Cash Rate by 25 basis points to 2.25%, following a discussion that also considered leaving the rate unchanged, the Bank said Thursday.
The case for holding the OCR highlighted the substantial easing already delivered, which is still filtering through the economy, the bank noted. Indicators are recovering, and activity is expected to strengthen through 2026. Members also noted upside risks to inflation and output, arguing that keeping the OCR unchanged would preserve optionality to cut later if needed.
The case for the anticipated reduction emphasised significant excess capacity in the economy, giving confidence that medium-term inflation will return to the target midpoint. (See MNI RBNZ WATCH: RBNZ To Cut 25bp, Signal Path Ahead) With the recovery still in its early stages, the inflation outlook provides scope to place more weight on avoiding unnecessary volatility in output and employment. Maintaining the easing in financial conditions to date would support a sustained pickup in activity, members said.
The Committee discussed how to balance its inflation mandate with the need to avoid undue instability in output, employment, interest rates and the exchange rate. Future moves will depend on how the medium-term inflation and economic outlook evolves, the statement noted.
