Source: Sharecast
The decision, which was widely expected by markets, came as the central bank responded to subdued domestic demand and rising global uncertainty stemming from US trade policy.
One member of the Monetary Policy Committee dissented, voting to keep rates unchanged.
The RBNZ now forecast the cash rate would fall to 2.85% by early 2026, slightly below its previous projections, implying one to two further cuts in the current cycle.
Governor Christian Hawkesby said the committee held “no bias” on the outcome of the next meeting, although market pricing and central bank forecasts suggested the next move was likely in August.
The central bank also warned that tariffs and policy uncertainty abroad were expected to weigh on New Zealand’s recovery and could dampen medium-term inflation.
While annual inflation remained within the bank’s 1% to 3% target band at 2.5%, the RBNZ projected a near-term rise to 2.7% before easing to 1.9% next year.
Growth was expected to remain sluggish in the near term, with quarterly GDP gains of just 0.2% to 0.4% through late 2025, while unemployment was forecast to peak at 5.2%.
The RBNZ acknowledged heightened risks to its outlook, publishing scenarios in which global trade shocks could either deepen rate cuts or prompt a later tightening.
Having previously led global central banks in withdrawing pandemic stimulus, the RBNZ was now navigating a slower recovery and a neutral policy stance.
Market watchers said upcoming domestic data, including June inflation and first quarter GDP, would be critical in determining whether the easing cycle continues.
“There’s plenty of water to go under the bridge both domestically and internationally,” said analysts at Westpac.
“We suspect that it will be easier to make the case for another easing in August than July given the pending negotiation dates set by the US authorities on trade agreements.
“The second quarter CPI will also be quite important, but equally, uncertainty is high and a range of events both positive and negative could occur.”
Westpac said it was too early to call time on the easing cycle.
“Policy is well placed to respond to whatever happens now the OCR is in the middle of the long- and short-term estimates of the neutral OCR ... policy is ‘neutralish’.
“If nothing overtly negative happens to the economy or medium-term inflation outlook between now and August, then there could be no change in the OCR in August also. Let’s see.”
Reporting by Josh White for Sharecast.com.
