Wellington (Business Emerge), August 16: In a recent address to the Wellington Chamber of Commerce, Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr suggested that the central bank might implement two additional rate cuts before the year concludes. He expressed his strong inclination toward these reductions, provided the economic data aligns with expectations. The central bank had already surprised the market earlier this week by lowering its benchmark interest rate by 25 basis points, a move that marks the first cut since March 2020.
Governor Orr indicated a preference for continuing rate reductions into 2025, aligning with economists’ predictions for a series of cuts over the coming year. The RBNZ has projected that the official cash rate could drop to 3.85% by the end of 2025, down from the current rate of 5.25%. Market participants are anticipating an even lower rate, around 3.0%, by that time.
This anticipated easing is part of a broader global trend, with major central banks such as the European Central Bank, Bank of Canada, and Bank of England also scaling back their aggressive rate hikes from recent years. The U.S. Federal Reserve is similarly expected to begin reducing rates as early as next month.
Assistant Governor Karen Silk, in an interview, highlighted that the decision to cut rates on Wednesday was influenced by several economic indicators showing weaker-than-expected activity. The RBNZ is now forecasting a recession for New Zealand in the near term, with policymakers focusing on stabilizing the economy amid subdued domestic demand and challenging global growth conditions.
A recent poll showed that the majority of economists anticipate another 50 basis points cut by the RBNZ before the end of the year. This move would align New Zealand with other central banks around the world that are easing monetary policies to support their economies as inflation pressures ease.