New Zealand Central Bank Cuts Rates to Three-Year Low, Flags Further Easing

New Zealand's central bank cut its official cash rate by 25 basis points to a three-year low of 3.00% as part of efforts to support a fragile economic recovery amid domestic and global challenges. The Reserve Bank of New Zealand (RBNZ) highlighted that the economy stalled in the second quarter of 2025 and noted both upside and downside risks, with cautious behavior from households and businesses potentially dampening growth further. The bank projects the cash rate to decline further, forecasting it at 2.71% by the end of 2025 and 2.55% in early 2026, contingent on medium-term inflation pressures easing as expected. Inflation is anticipated to return to the 2% target midpoint by mid-2026, with the RBNZ emphasizing spare capacity and declining domestic inflation pressures. The rate cut decision, made by a majority vote, balanced the risks of inflation rising above target and ongoing global policy uncertainty affecting domestic consumption and investment. This move follows a series of reductions totaling 250 basis points since August 2024 to underpin the economic recovery and mitigate impacts from changes in U.S. tariff policies.