New Zealand’s central bank kept its benchmark interest rate at 3.25 percent on Wednesday, saying near-term inflation risks remain but signaling it may lower rates later if price pressures continue to ease.
The Reserve Bank of New Zealand has cut rates by 225 basis points since August 2024 and said it expects to lower the rate again in line with projections made in May.
The bank said inflation is expected to reach the top of its 1 to 3 percent target range during the second and third quarters of 2025. It added that while lower interest rates and strong export prices are helping support the economy, global policy uncertainty and trade tariffs are likely to slow global growth, which could reduce inflation pressure in New Zealand.
The statement said the pace of recovery in the country remains uncertain and future rate decisions will depend on incoming data. This includes the speed of the recovery, how persistent inflation is, and how tariffs affect the economy.
The RBNZ began raising interest rates in October 2021, increasing them by a total of 525 basis points until September 2023 to control inflation.
That tightening pushed the economy into a recession last year. While growth has since returned, some parts of the economy remain weak due to global conditions and tight fiscal policy.
The central bank’s latest decision to hold rates matched expectations from most economists. Market reaction saw the New Zealand dollar fall 0.3 percent to $0.5977.
Swap rates stayed steady as markets shifted expectations for the next rate cut to the RBNZ’s August meeting.
New Zealand is among several countries that have started cutting interest rates as inflation slows. Its current approach differs from that of the U.S. Federal Reserve and the Reserve Bank of Australia, which have both taken a more cautious stance.
On Tuesday, Australia held its interest rate steady at 3.85 percent, surprising investors who had expected a cut.
