OCR to 3.5% | Strategic Shift Amid Global Uncertainty
RBNZ Cuts OCR to 3.5% — Strategic Shift Amid Global Uncertainty
The Reserve Bank of New Zealand (RBNZ) has announced a reduction in the Official Cash Rate (OCR) by 25 basis points to 3.5%. As the inflation rate is close to the middle of the target range, the Bank has been using the accommodative policy to make sure that New Zealand’s economy will be stimulated and that the price stability will be maintained.
Domestic Landscape
- Inflation: Sitting comfortably within the 1–3% target band — giving the RBNZ room to act.
- Economic Slack: The economy still shows signs of underutilised capacity due to past monetary tightening and cautious fiscal policy.
- Household Sector: Consumption and residential investment remain notably subdued.
- Tailwinds: Strong export prices and a weaker NZD are providing some offsetting momentum.
Global Crosscurrents
- Trade Tensions: US-led tariff moves are reshaping trade flows, adding uncertainty.
- Geopolitical Risks: Tensions are elevated, posing downside risks to global demand.
- Inflation: The global inflation outlook remains unclear. Tariffs could fuel price increases or slow demand-driven inflation depending on how markets respond.
Future Outlook
- More Cuts Possible: If global risks materialise or domestic momentum weakens further, the door remains open.
- Lag Effects Matter: The RBNZ acknowledges that the full impact of recent OCR reductions is still feeding through.
- Focus on Medium-Term: The Bank prioritises sustained inflation control and economic balance — no rash moves based on short-term volatility.
Increased Savings, Bigger Possibilities
With rates heading south, now’s a great time to talk to the Rapson team. Whether you’re eyeing a sharper deal on your current mortgage or wondering if it’s time to tweak your fixed vs floating setup, we can help you make the most of the shift.