The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decided to cut the official cash rate (OCR) by 25 basis points to 3.35% at its meeting this morning, Wednesday, May 28, as expected, for the sixth consecutive meeting.
The statement issued by the Bank indicated that annual consumer price inflation rose to 2.5% in the first quarter of this year, and inflation expectations among businesses and households rose. However, core inflation is declining, and the economy has excess capacity. These conditions are consistent with a return to the inflation target range of 1%–3% over the medium term.
Rising exports and recent exchange rate depreciations are expected to support a modest pace of growth for the New Zealand economy, even as tariffs are expected to impact global growth.
The Bank expects annual CPI inflation to rise to 2.7% in the third quarter of this year and return to near the 2% target midpoint in 2026, with the short-term increase in headline inflation including higher food and electricity prices. The bank left the door open to further interest rate cuts, adding that as the scope and impact of tariff policies become clearer, the committee has room to cut interest rates as needed.