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New Zealand: Central Bank decides to decrease rates in April
Latest bank decision: At its meeting on 9 April, the Central Bank agreed to reduce the Official Cash Rate (OCR) by 25 basis points to 3.50%, taking total rate cuts to 200 basis points since August 2024, when the easing cycle began.
Monetary policy drivers: The decision was influenced by inflation being near the mid-point of the Bank’s 1.0–3.0% target range, which provided the leeway to keep cutting rates to support the soft economy; in particular, the Bank commented on weak household spending and residential investment, as well as the downside risk to the economy posed by higher global tariffs.
Policy outlook: The Central Bank indicated that it has scope to lower the OCR further, depending on the extent and effect of tariff policies and the inflation outlook over the medium term. Virtually all our panelists expect further rate cuts later this year to support economic activity; our Consensus is currently for the OCR to reach a terminal rate of close to 3%, with a weaker global economy due to tariffs a downside risk.
Panelist insight: On the outlook, Goldman Sachs analysts said:
“Looking forward, our base case remains for sequential 25bps cuts at the May and July meetings to a terminal rate of 3.0%, although we see risks clearly skewed to larger and deeper cuts depending on the upcoming evolution of global tariffs.”
ANZ analysts said:
“The RBNZ did not push back against market pricing that currently implies a strong risk that the OCR ends up lower than previously envisaged. That is the way things are tilting currently, but it remains a very volatile and unpredictable situation, and the RBNZ has, as expected, opted to wait and see, dialing down the certainty on where the OCR will go from here.”
