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”.
It’s the first time the OCR has not received a cut since July 2024. (Source: 1News)
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.”
Finance Minister Nicola Willis said more Kiwis will benefit when they re-fix their mortgage this year, and pointed to the 2.25% point reduction in the OCR since August 2024.
“Lower interest rates free-up household budgets for spending elsewhere and they ease the path for those wishing to enter the housing market.
“They also provide relief to interest-rate sensitive sectors of the economy, including building and construction, with lower interest rates often providing a kick-start for big new projects.“
Willis to meet Fonterra boss over dairy prices
The Finance Minster signalled she would meet with the Fonterra chief executive “in the next little while” to talk about “what we can do to make sure New Zealanders have affordable cheese, milk and butter”.
“What I worry about is when I see that it appears you can get cheaper milk and butter in other countries than here, and as I say I’m going to be talking to Fonterra about what’s behind that, because I’m on the side of New Zealanders who say ‘well that doesn’t seem quite right.'”
Willis added she was “interested” to see how much of the dairy prices in New Zealand were due to “supermarket competition” and “prices Fonterra are passing through”.
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.”
