On July 3, 2017, a security guard stood at the main entrance of the Reserve Bank of New Zealand in downtown Wellington, New Zealand.
David Gray | Reuters
The Federal Reserve Bank of New Zealand cut the cash rate by 25 basis points to 5.25% on Wednesday.
The move surprised economists polled by Reuters, who had expected the central bank to keep interest rates unchanged at 5.5%.
This is the first time the central bank has cut the official cash rate since March 2020.
In its release, The Bank of New Zealand noted that consumer price inflation is returning to its target range of 1% to 3%. “The survey’s inflation expectations, corporate pricing behavior, headline inflation, and various core inflation measures are all consistent with low and stable inflation,” the report said.
Although inflation in the country’s services sector remains high, the Federal Reserve Bank of New Zealand expects inflation to fall and New Zealand’s consumer price inflation is expected to remain at 2% “for the foreseeable future.” about.
The central bank later said the pace of further easing would depend on confidence in the low-inflation environment and inflation expectations around the 2% target.
The Bank of New Zealand also lowered its December benchmark interest rate forecast to 4.92%, suggesting that the central bank may cut interest rates again before the end of the year.
The trajectory of rate cuts is also expected to be sharply steep. At its May monetary policy meeting, the central bank forecast interest rates in December 2024 and 2025 at 5.65% and 5.14% respectively. Currently, the company has slashed the figure to 4.92% in December 2024 and 3.85% in December 2025.
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