FX.co ★ RBNZ Signals Openness to Additional Rate Cuts

Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway highlighted that the official cash rate (OCR) of 2.5% is currently positioned at the lower spectrum of the neutral range. However, the Monetary Policy Committee (MPC) remains willing to implement further rate reductions if deemed necessary. Last week, the RBNZ reduced the OCR by 50 basis points (bps), accumulating a total decline of 300 bps since August 2024. During an interview with Bloomberg TV, as cited by Reuters, Conway explained that the 50 bps reduction was a "very finely balanced" decision, especially since inflation hovers near the upper limits of the RBNZ's target range of 1% to 3%. He added that the economy's spare capacity instilled confidence among policymakers that inflation would gradually align with the 2% midpoint over time. Conway also referred to a recent New Zealand Institute of Economic Research (NZIER) survey indicating a deterioration in business sentiment during the third quarter, which bolstered the RBNZ’s stance on the necessity for accommodative monetary policy. While open to additional interest rate cuts, he emphasized that policymakers would carefully evaluate upcoming economic data before making further decisions.