"There are upside and downside risks," Monetary Policy Committee says
The Reserve Bank of New Zealand has cut the official cash rate by 25 basis points to 3%.
Its Monetary Policy Statement noted that economic recovery stalled in the second quarter amid global uncertainty and constrained household spending.
CPI inflation increased to 2.7% in the June 2025 quarter, and is expected to reach 3% in the September 2025 quarter – the upper end of RBNZ’s target band. However, the MPS said that medium-term inflation expectations remain near 2%.
RBNZ also noted that there is “significant spare capacity” in the economy with increased unemployment, labour underutilisation, and slow business lending. Still, lower wholesale interest rates will reduce debt servicing costs for households, and RBNZ expects this to “continue to transmit through the financial system.”
The decision was reached by a majority 4-2 vote. This indicates a committee increasingly pulled in two different directions, following May 2025’s 5-1 vote.
