In a clear signal of urgency, New Zealand’s Reserve Bank cut its Official Cash Rate by 50 basis points to 2.50%, underlining its determination to support the economy and maintain credibility at a time of rising global risks.
The Monetary Policy Committee reached consensus on the cut, moving decisively in the face of weak growth, slack capacity, and inflation pressures at the top of its target band. The bank also reaffirmed its openness to further easing if conditions warrant.
In recent months, the RBNZ had already trimmed rates aggressively. This larger cut suggests a willingness to front-load stimulus and to avoid policy lags.
The move reinforces the bank’s policy credibility: by acting boldly, it aims to shape market expectations and reassure households and firms that support is real and ready.
Still, maintaining credibility requires navigating inflation and external pressures carefully. Overstimulating or falling behind inflation could erode trust.
This decision sends a strong message: the RBNZ views current risks to growth as more pressing than inflation overshoot.
