WELLINGTON, Oct. 8 (Xinhua) -- New Zealand's central bank cut its official cash rate (OCR) by 50 basis points to 2.5 percent on Wednesday to revive weak economic growth.
The Reserve Bank of New Zealand's (RBNZ) Monetary Policy Committee said annual consumer price inflation is near the top of its 1-3 percent target band but spare capacity in the economy should bring it down around the 2 percent target mid-point over the first half of 2026, according to a RBNZ statement.
Economic growth through the middle of 2025 was weak, due to supply constraints in some industries and global economic policy uncertainty, it said.
"Household consumption is recovering, partly because of lower interest rates, and elevated commodity prices continue to support the primary sector. House prices are flat, and residential and business investment remain weak," the statement said.
Growth among New Zealand's trading partners is proving resilient, bolstered by AI-related investment, but is projected to slow in 2026, it said.
The committee warned of risks in both directions: cautious consumer and business behavior could slow the economic recovery, while higher near-term inflation might be more persistent.
It remains open to further OCR cuts if needed to anchor inflation sustainably near the 2 percent target mid-point in the medium term.
Finance Minister Nicola Willis said Wednesday's 50 basis point OCR reduction will further ease pressure on Kiwi households and businesses, and is good news for growth, jobs, and investment, which means more money in the hands of families with mortgages.
"Today's decision means the OCR has now dropped from 5.5 percent to 2.5 percent in just over a year, a significant shift that is taking some of the edge off a very challenging economic recovery," Willis said. ■
