New Zealand's Reserve Bank Cuts Interest Rates
Inflation Returns Within Monetary Policy Target Range
New Zealand's annual consumer price inflation is returning to within the Monetary Policy Committee's (MPC) target range of 1% to 3%.
Lower inflation expectations of firms and households will help reinforce the slowdown in inflation with less pressure on the Reserve Bank to raise interest rates.
Reserve Bank Eases Official Cash Rate
The Reserve Bank has eased the official cash rate (OCR) by 25 basis points to 5.25% on 14 August.
This is the first time the OCR has been cut since March 2020.
The Reserve Bank has flagged that further cuts may be necessary to bring inflation back to its target range.
Annual Inflation Cools
New Zealand's annual inflation has come off in recent months and is currently running at 3.3%.
This is down from a peak of 7.3% in June 2022.
The Reserve Bank expects inflation to continue to fall in the coming months.
Central Bank Embarks on Easing Cycle
New Zealand's central bank has cut interest rates embarking on an easing cycle much sooner than previously indicated.
The Reserve Bank had previously indicated that it would not cut interest rates until late 2024.
However, the sharp fall in inflation has prompted the Reserve Bank to change its stance.
Consumer Price Index Increase
New Zealand's consumers price index (CPI) increased 4.0% in the 12 months to the March 2024 quarter according to Statistics New Zealand.
This is the largest annual increase in the CPI since June 2009.
The increase was driven by higher prices for food, housing, and transportation.
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