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Alsharq Tribune-Otaify
New Zealand's central bank cut its benchmark interest rate by 25 basis points to 2.25 percent on Wednesday, taking the Official Cash Rate (OCR) to a three-year low to support economic recovery.
Annual consumers price inflation increased to 3 percent in the September quarter but is expected to fall to around 2 percent by mid‑2026 as spare capacity in the economy absorbs price pressures, the Reserve Bank of New Zealand said in a statement.
Wednesday's cut was the ninth reduction since rates peaked at 5.5 percent in July 2024. Future moves in the OCR will depend on how the outlook for medium-term inflation and the economy evolves, it said.
The central bank noted that economic activity was weak over mid-2025 but is now picking up, adding that lower interest rates are encouraging household spending, and a falling exchange rate is supporting export incomes.
Global economic growth has benefited from strong artificial intelligence-related investment but is expected to slow in 2026 as trade barriers weigh on activity, the statement said.
Risks to the inflation outlook are balanced, it said, adding that greater caution on the part of households and businesses could slow the pace of New Zealand's economic recovery.
"Alternatively, the recovery could be faster and stronger than expected if domestic demand proves more responsive to lower interest rates," the statement said.
"New Zealanders have had a tough few years, but things are looking up," said Finance Minister Nicola Willis, adding thousands of Kiwis are taking the opportunity presented by lower rates to buy their first homes.
