RBNZ has released its May Monetary Policy Statement and OCR decision
The Reserve Bank of New Zealand (RBNZ) has lowered the Official Cash Rate (OCR) by 25 basis points to 3.25%.
The decision, made by majority 5-1 vote of the Monetary Policy Committee, marks the second cut since August 2024. Governor Christian Hawkesby said current conditions support inflation returning to the 1–3% target band midpoint over the medium term.
Consumer price inflation rose to 2.5% in the March quarter, but remains within the target band. It’s expected to peak at 2.7% later this year before drifting back down toward 2% in 2026. The Reserve Bank also noted that falling interest rates are starting to ease pressure on mortgage holders, with around half of all loans set to reprice in the next two quarters.
The wider economy, however, remains under pressure. Domestic demand is soft, business investment is subdued, and labour market conditions have weakened. The unemployment rate is forecast to hit 5.2% in the June quarter before easing as the economy recovers.
Global factors are adding to the uncertainty. Trade tensions, especially between the US and China, have disrupted global supply chains and dampened business confidence worldwide. While New Zealand’s export prices remain strong, the Reserve Bank says lower global growth will likely reduce demand.
Looking ahead, the Reserve Bank’s forecasts predict the OCR falling to 2.9% by the end of 2025, with a gradual easing path continuing into 2026.
