MNI RBNZ Review-April 2025: “Scope” To Cut Further

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EXECUTIVE SUMMARY: 

• The RBNZ cut rates 25bp to 3.5% as was widely projected, due to significant domestic spare capacity and a weaker outlook from “global trade policy” which should result in inflation staying close to the target mid-point.
• Global developments are likely to be a significant driver of the inflation outlook and a large part of the April statement was devoted to risks from abroad. The MPC noted that “on balance” US tariffs are a downside risk to NZ growth and CPI inflation, but the MPC didn't reach consensus  on the effect on the latter.
• RBNZ dated OIS pricing has 34bps of easing for May, with a cumulative 82bps by November 2025.
• Weak growth suggests that rates are likely to fall towards the estimated 3% neutral rate, although recent events make this number even less certain. The impact of increased trade protectionism could result in the RBNZ shifting policy so it is stimulatory.