New cut for official cash rate

The Reserve Bank of New Zealand has cut the official cash rate (OCR) by 25 basis points from 3.75 per cent to 3.5 per cent, its lowest level since October 2022.

In an announcement on April 9, the bank notes annual consumer price inflation remains near the mid-point of the monetary policy committee’s one to three per cent target band. 

It continues that companies’ inflation expectations and core inflation are consistent with inflation remaining at target over the medium term.

“Economic activity in New Zealand has evolved largely as expected since the February monetary policy statement,” the central bank adds. 

“Higher-than-expected export prices and a lower exchange rate have supported primary sector incomes and overall economic growth. 

“While monetary restraint has been removed at pace, household spending and residential investment have remained weak.”

It adds recently announced increases in global trade barriers weaken the outlook for global economic activity. 

“On balance, these developments create downside risks to the outlook for economic activity and inflation in New Zealand.

“Having consumer price inflation close to the middle of its target band puts the committee in the best position to respond to developments.”