The Reserve Bank of New Zealand (RBNZ) has reduced its official cash rate by 25 basis points to 3.5%, matching market expectations. This marks the fifth rate cut since the RBNZ initiated its easing cycle in mid-2024.
Inflation remains close to the midpoint of the bank's 1% to 3% target range, and while local economic growth shows resilience, this is largely confined to certain sectors. The RBNZ has highlighted that the recent rise in "global trade barriers" poses downside risks to New Zealand's economic activity and inflation outlook, which is likely a reference to the U.S. import tariffs imposed under President Donald Trump.
Trump's latest round of reciprocal tariffs is scheduled to come into effect later this Wednesday. However, the RBNZ indicated that it has the flexibility to implement further rate cuts as the full impact of Trump's tariff policies becomes more evident.
The central bank also emphasized that future policy decisions will be guided by the medium-term inflation outlook.
This rate decision on Wednesday was the first under the interim leadership of RBNZ Chair Christian Hawkesby, who will serve in this role for six months while the bank searches for a successor to former Chair Adrian Orr, who resigned abruptly in early March. Under Orr's tenure, the RBNZ began a delayed easing cycle in late 2024, as inflation started to align more closely with the central bank's expectations.
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