New Zealanders Finally See Interest Rates Fall as Central Bank Braces for Another Recession

The Reserve Bank of New Zealand has made a surprise decision to reduce the official cash rate, and banks are dropping loan rates.

Reserve Bank Governor Adrian Orr speaks during a press conference at the Reserve Bank of New Zealand, in Wellington, New Zealand, on March 16, 2020. Hagen Hopkins/Getty Images

New Zealand’s central bank’s decision to cut the official cash rate (OCR) by 25 basis points, from 5.5 to 5.25 percent, has shocked the market and economists. This is a complete about-face from what it said just a month ago.

The Reserve Bank of New Zealand (RBNZ) had stuck to the 5.5 percent rate for over a year through several reviews. Its most recent forecast in May gave a 60 percent chance of another increase in the OCR (to 5.75 percent), while warning cuts were off the table until the second half of 2025.