New Zealand’s central bank is poised to cut its key interest rate for the sixth meeting in a row, likely signaling that more easing could follow as rising US trade barriers cloud the economic outlook.
The Reserve Bank of New Zealand is set to lower the Official Cash Rate by 25 basis points to 3.25 percent at its policy meeting on Wednesday in Wellington, according to 22 out of 23 economists surveyed by Bloomberg. One respondent expects a larger, 50-point reduction. The Monetary Policy Committee is also expected to indicate that the OCR might fall below 3 percent before the end of the year.
“We see the RBNZ’s OCR profile being revised down by around 20 basis points to around 2.9 percent by the end of 2025,” said Kelly Eckhold, chief economist at Westpac in Auckland. “Beyond this meeting, a data-dependent easing bias seems likely.”
Last month, the RBNZ noted that it had room to drive rates lower as US tariffs pose downside risks to both activity and inflation. While some trade tensions have eased, uncertainty remains, and it is expected to weigh on New Zealand’s rebound from last year’s recession.
The bank will publish its rate decision at 2 p.m. local time on Wednesday, followed by a press conference with Governor Christian Hawkesby at 3 p.m. It will also release updated economic forecasts, which should shed light on how deeply global trade strains could dent growth.
Economists view US-China trade war as “net negative” to New Zealand
“Despite tariff de-escalation, we continue to view the US-China trade war as a net negative to the New Zealand economy and inflation over the medium term,” said Wesley Tanuvasa, an economist at ASB Bank in Auckland. “Pronounced uncertainty means the RBNZ will want optionality on policy moves, so we’d expect cautious, data- and event-dependent commentary on the outlook for monetary policy.”
Recent indicators have painted a mixed picture. Unemployment held steady at 5.1 percent in the first quarter, defying forecasts of a rise. Commodity prices remain firm, and measures of inflation expectations have edged higher.
Most forecasters, as well as the RBNZ itself, expect headline inflation to pick up toward the top of the central bank’s 1–3 percent target range from its current 2.2 percent pace, before easing back next year.
At the same time, the housing market is subdued, business confidence has slipped, and last week’s tight government budget is projected by the Treasury to leave scope for further rate cuts.
Some economists predict the OCR will fall to 2.5 percent by year-end, while market pricing implies a fair chance of a move to 2.75 percent.
“In this kind of environment, there’s plenty of leeway for strategy to play a role,” said Sharon Zollner, chief New Zealand economist at ANZ Bank in Auckland. “We continue to expect that the RBNZ will ultimately deliver an OCR of 2.5 percent, but we don’t expect them to signal such an outcome at this stage.”
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