The Reserve Bank of New Zealand has announced a reduction in the Official Cash Rate (OCR) by 50 basis points, lowering it from 4.75% to 4.25%.

This marks the lowest OCR level since November 2022 and follows a similar 50-basis-point cut in October.

The Monetary Policy Committee (MPC) made the decision in response to easing inflationary pressures and subdued economic activity.

Annual consumer price inflation is now close to the midpoint of the Committee’s 1–3% target band.

Core inflation has also shown signs of convergence toward this midpoint, aligning with the Committee’s long-term objectives.

Economic conditions within New Zealand remain restrained, with economic output below its potential and employment growth expected to remain weak until mid-2025.

Excess productive capacity in the economy and a reduction in domestic price and wage-setting pressures have contributed to the easing of inflation.

Additionally, falling import prices have further reduced headline inflation figures.

Globally, economic growth continues to face challenges, with geopolitical uncertainties and policy instability contributing to potential volatility.

However, the Committee noted that having inflation close to the midpoint of its target range allows for greater flexibility in responding to unexpected economic developments.

Looking ahead, the Reserve Bank indicated that further reductions to the OCR might occur early next year, should economic conditions evolve as projected.

Lower interest rates are expected to encourage investment and spending, supporting a gradual economic recovery by 2025.

In a statement, the Reserve Bank of New Zealand said the decision underscores the Reserve Bank’s commitment to maintaining price stability while addressing current economic challenges both domestically and internationally.