Earlier:
Reserve Bank of New Zealand announce cash rate cut to 5.25%NZD/USD marked lower after the Reserve Bank of New Zealand cut its cash rate
I’m glad I got my forecast the right way! RBNZ Governor Orr doesn’t wait around for a bazillion confirmations, he just goes and gets it done. A bit like Wheeler before him:
I’m going out on a limb, not very much though I reckon, with a 25bp rate cut.
Reserve Bank of New Zealand from the statement:
sees
official cash rate at 4.1% in September 2025 (pvs 5.4%)sees TWI NZD at around 69.5% in September 2025 (pvs 71.0%)sees official cash rate at 4.92% in December 2024 (pvs 5.65%)sees official cash rate at 3.85% in December 2025 (pvs 5.14%)sees annual CPI 2.4% by September 2025 (pvs 2.2%)sees official cash rate at 2.98% in September 2027Inflation is decliningInflation returning into target bandService inflation expected to declinePace of further easing will depend on commitee’s confidence that
pricing behaviour remains consistent with a low inflation environmentCPI expected to remain target mid-point over foreseeable future
RBNZ from the meeting minutes:
Weakening
in domestic economic activity observed in the July Monetary Policy
Review has become more pronounced and broad-basedMembers noted that monetary policy will need to remain restrictive
for some time to ensure that domestic inflationary pressures continue
to dissipateNew Zealand’s economic activity and near-term inflation indicators
now resemble those in countries in which central banks have started
cutting policy ratesThe pace of further easing will thus be conditional on the
Committee’s confidence that pricing behaviour is continuing to adapt
to a low-inflation environmentA broad range of high-frequency indicators point to a material
weakening in domestic economic activity in recent monthsRecent indicators give confidence that inflation will return
sustainably to target within a reasonable time frameThe output gap is now assessed to be more negative than was
assumed in the May Monetary Policy Statement, indicating increased
spare capacityHeadline CPI inflation expected to return to the target band in
the September quarterCommittee agreed there was scope to temper the extent of monetary
policy restraintAlongside restrictive monetary policy, an earlier or larger impact
of tighter fiscal policy could be constraining domestic demandThe Committee observed that the balance of risks has progressively
shifted since the May Monetary Policy StatementWhile domestic financial conditions remain restrictive, they have
loosened over recent monthsBroad range of indicators suggesting the economy is contracting
faster than anticipatedCommittee felt that the OCR track in the projection reflected its
view on the policy strategy that would best deliver on its remit
The Bank quick to update its front page:
This article was written by Eamonn Sheridan at www.forexlive.com.
