New Zealand’s RBNZ Lowers Official Cash Rate to 3.25% in May
New Zealand’s RBNZ Lowers Official Cash Rate to 3.25% in May
On May 28, 2025, the Reserve Bank of New Zealand (RBNZ) announced a reduction in the Official Cash Rate (OCR) by 25 basis points, bringing it to 3.25%. The decision, revealed at 2:00 PM NZST during a press conference led by Governor Christian Hawkesby, was widely anticipated by economists and aligns with market expectations. This marks the latest move in the RBNZ’s ongoing efforts to stimulate economic activity amid global uncertainties, particularly driven by U.S. trade policies. The announcement, part of the Monetary Policy Statement, reflects the bank’s response to a recovering yet fragile New Zealand economy navigating a complex global landscape.
The OCR, the RBNZ’s primary tool for influencing borrowing costs and economic activity, reached 3.25% following a non-unanimous decision by the Monetary Policy Committee, with one member advocating to maintain the rate at 3.5%. The statement released today highlights a cautious outlook, noting that New Zealand’s economy is rebounding after a period of contraction, supported by high commodity prices and lower borrowing costs. However, global trade tensions, particularly U.S. tariffs, are expected to temper this recovery. Inflation, currently at 2.5% annually, remains within the RBNZ’s 1–3% target band, providing room for further easing if needed. The bank projects the OCR to reach 3.12% by September 2025, signaling a slightly deeper easing cycle than previously forecasted.
Today’s announcement at 2:00 PM NZST prompted varied market reactions. The New Zealand dollar rose slightly, reaching US$0.5970 from US$0.5930, while two-year interest rate swaps moved to 3.23%. Major banks, including ASB and Westpac, are expected to adjust mortgage and savings rates in response, potentially easing financial pressures for households. The RBNZ emphasized that lower oil prices and a weaker NZ dollar could support domestic consumption, but global policy uncertainties pose risks. The next Monetary Policy Statement, scheduled for July 9, 2025, will offer further guidance on the OCR’s trajectory, with economists eyeing a potential additional cut as global conditions evolve.
