Auckland October 9 2024: New Zealand’s central bank slashed rates by 50 basis points on Wednesday and said policy is still restrictive even though inflation has returned to target, prompting markets to bet on yet more aggressive easing and sending the kiwi dollar skidding.
The decision to reduce the cash rate to 4.75% was in line with market pricing and most economists’ expectations, with 17 of 28 economists in a Reuters poll having forecast the Reserve Bank of New Zealand (RBNZ) to cut the benchmark rate by half a percentage point.
“The Committee agreed that it is appropriate to cut the OCR (official cash rate) by 50 basis points to achieve and maintain low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates, and the exchange rate,” the central bank said in its policy statement.
The kiwi dollar fell 0.6% to $0.6103, the lowest since late August, while two-year swap rates declined 4 basis points to 3.630% after the decision. Swaps imply there is further 40 basis points of easing to come at the RBNZ’s November meeting.
