New Zealand: RBNZ reduces OCR by 25 bps, with scope for deeper cuts ahead – UOB Group

As widely expected, the Reserve Bank of New Zealand (RBNZ) decided to lower the Official Cash Rate (OCR) by 25bps to 3.50%. This is the RBNZ’s fifth straight cut since it kicked off an easing cycle in 2024, bringing rates lower by a total of 200bps since August 2024, UOB Group's economist Lee Sue Ann notes.

RBNZ is going to cut even more

"In a widely expected move, the Reserve Bank of New Zealand (RBNZ) cut interest rates by 25 bps from 3.75% to 3.50%. The cut is the RBNZ’s fifth rate reduction since it began an easing cycle in mid-2024."

"The RBNZ noted that inflation remained near the midpoint of its 1% to 3%, and while economic growth was resilient, the RBNZ has scope to cut interest rates further, as the full extent and effect of Trump’s tariff policies becomes clearer."

"We think that we could see more rate cuts being needed as compared to our base case scenario for two more 25 bps cuts for the rest of the year. The next monetary policy meeting is on 28 May, and the Monetary Policy Statement update then could be an opportunity for the RBNZ to signal more cuts in order to support the economy. We will review our forecasts accordingly then, as we continue to monitor ongoing developments."