The Official Cash Rate (OCR) has been held at 3.25%.
It is the first time the OCR has not received a cut since July 2024, marking the end of six consecutive cuts.
The decision to hold the OCR at its current rate by the Reserve Bank of New Zealand (RBNZ) was widely expected by economists.
Last week, Infometrics economist Brad Olsen told 1News expectations in the market are for no cut to the OCR in July “as the RBNZ takes a pause”.
He did however add the market is expecting “one further cut”, which would be “pencilled in at some point before the end of 2025”.
Today, RBNZ said annual consumers price inflation will likely increase towards the top of the Monetary Policy Committee’s one-to-three percent target band over mid-2025.
“However, with spare productive capacity in the economy and declining domestic inflation pressures, headline inflation is expected to remain in the band and return to around 2% by early 2026.
“Elevated export prices and lower interest rates are supporting a recovery in the New Zealand economy. However, heightened global policy uncertainty and tariffs are expected to reduce global economic growth. This will likely slow the pace of New Zealand’s economic recovery, reducing inflation pressures.”
RBNZ outlines path for further cuts
RBNZ added the current economic outlooks remains “highly uncertain”.
“Further data on the speed of New Zealand’s economic recovery, the persistence of inflation, and the impacts of tariffs will influence the future path of the Official Cash Rate.
“If medium-term inflation pressures continue to ease as projected, the Committee expects to lower the Official Cash Rate further.”
Are mortgage rates expected to drop?
Olsen told 1News banks are likely to tweak their rates slightly to remain competitive, but large cuts to interest rates have largely run their course.
“Further OCR cuts or global interest rate declines would be needed to see any more substantial easing in rates.”
