The Reserve Bank of New Zealand delivered a widely anticipated 25 basis point rate cut this week, lowering the Official Cash Rate (OCR) to 3.25%—bringing the total reduction in the current easing cycle to 225 basis points.
In a note to clients, economists at Wells Fargo said the move reflects a mix of softening price and wage pressures and signs of stabilisation in the broader economy. The bank expects the RBNZ to continue easing, though in a measured fashion.
“We see it transitioning to a once-per-quarter rate cut pace,” the note said, with the next 25 basis point reductions pencilled in for August and November. That would bring the OCR to a cycle low of 2.75% by year-end.
Wells Fargo’s outlook suggests the RBNZ is entering a phase of cautious normalisation, balancing inflation risks with the need to support a still-fragile recovery.
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ICYMI:
- RBNZ assistant governor silk: China’s low domestic consumption is a key issue
- Reserve Bank of New Zealand Governor Hawkesby sees near term growth headwinds
- RBNZ Gov. Hawkesby says decision to hold a rate vote was a healthy sign
- NZD/USD bouncing after the expected RBNZ 25bp cash rate cut
- RBNZ cuts cash rate by 25bp vs. 25bp expected
This graph from the RBNZ, note its not yet updated for yesterday’s cut.
This article was written by Eamonn Sheridan at www.forexlive.com.
