New Zealand: RBNZ reduces OCR by 50bps – UOB Group

The Reserve Bank of New Zealand (RBNZ), at its first monetary policy of the year, decided to lower the Official Cash Rate (OCR) by 50bps to 3.75%. This is the RBNZ’s fourth cut since it kicked off an easing cycle in 2024, bringing rates lower by a total of 175bps since Aug 2024, UOB Group's Economist Lee Sue Ann notes.

RBNZ to act more cautiously from now on

"The Reserve Bank of New Zealand (RBNZ) cut interest rates by 50 bps from 4.25% to 3.75% earlier today (19 Feb), citing declining inflation, and said that it has the scope to cut rates even further in 2025. This is the RBNZ’s fourth cut since it kicked off an easing cycle in 2024."

"The RBNZ signaled further easing, stating that “if economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025.” According to the latest projections, the OCR is expected to decline to 3.1% by year-end and remain at that level until early 2028."

"With the OCR now much closer to neutral and the economy recovering slowly, we expect a more cautious RBNZ from here. Our view is that this is likely the last 50bps cut. For now, we look for a further 75bps of rate cuts in clips of 25bps for the rest of this year, taking the OCR to 3.00% by 3Q25."