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Quick Bites – RBNZ Cuts Rates

August 15th, 2024 | Article
By: Paul Zwi

New Zealand’s central bank cut interest rates on Wednesday 14th August after it said that its economy was contracting faster than it had anticipated.

The Reserve Bank of New Zealand (RBNZ) said that monetary policy needed to remain restrictive but opted to cut the interest rate from 5.5% to 5.25%, following central banks in Canada and the UK that have reduced borrowing rates in recent months.

NZ was one of the first in the world to start rapidly raising interest rates, starting in 2021, as inflation hit its economy. Many economists had expected the RBNZ to hold, but the market had begun to price in a cut in recent days leading up to the meeting.  

Key points in the RBNZ’s Policy Statement:

  • Inflation is declining and returning to target band.
  • Services inflation expected to decline.
  • Pace of further easing will depend on committee’s confidence that pricing behaviour remains consistent with a low inflation environment.
  • CPI expected to remain target mid-point over foreseeable future.

Source: RBNZ