The building of the Reserve Bank of New Zealand (RBNZ) in Wellington, New Zealand, Wednesday, February 22, 2023.
Mark COOTE | Bloomberg | Getty images
Wednesday, the central bank of New Zealand reduced the reference rates by 50 basis points to 3.75%, marking its fourth consecutive decline, because the relaxation of inflation offers the central banking room to stimulate a spraying economy.
This decision was in line with the expectations of economists interviewed by Reuters and marked the lowest policy rate since November 2022.
In its monetary policy declaration, the New Zealand reserve bank said that inflation had remained near the median point of its target band by 1% to 3%, which prompted it to reduce rates.
New Zealand has declared an inflation rate of securities of 2.2% in the quarter enclosed December 2024, the growth of prices decreasing of seven of the last eight quarters, according to LSEG data.
The drop in rates also occurs at a time when the country’s growth has decreased on an annual sliding basis for Five consecutive quarters Until September 2024, according to government data.
THE New Zealand dollar Formed by 0.4% to negotiate at 0.568 against the greenback.
The central bank is optimistic that economic growth is recovering in 2025. “Lower interest rates encourage spending, although high global uncertainty weighs business investment decisions,” said RBNZ.
The bank, however, warned that consumer inflation in New Zealand should be volatile in the short term, due to a lower exchange rate and higher petrol prices.
“The net effect of future changes in the commercial policy on inflation in New Zealand is not clear,” said RBNZ, adding that if economic conditions continue to evolve as expected, the policy rate could be reduced more in 2025.
RBNZ’s revised inflation forecasts for the coming year reflect the concerns of the bank concerning the increase in oil prices and a lower dollar in New Zealand, said Abhijit Surya, the main economist of APAC at Capital Economics.
He pointed out that RBNZ has confidence that prices due to national factors will continue to decrease, because the economy has excess capacity.
While the bank now plans to reduce the policy rate to 3% by the end of 2025, it will “possibly” reduce the rates to 2.25%, said Surya, without specifying a delay.
