New Zealand Interest Rate

The Reserve Bank of New Zealand lowered its official cash rate by 50 bps to 2.5% at its October 2025 meeting, a larger-than-expected move compared with the anticipated 25 bps cut, bringing borrowing costs to their lowest level since mid-2022. Policymakers cited prolonged spare capacity, subdued domestic activity, and downside risks from cautious household and business behavior, which could slow the economic recovery, prompting a stronger easing. Inflation also remains near the top of the 1–3% target band but is expected to return to the 2% mid-point by mid-2026 as tradables pressures ease. Headline inflation is estimated at 3% in Q3, driven by higher administered prices, food costs, and tradable goods, though underlying non-tradables inflation continues to moderate. Economic activity remained weak due to supply constraints and global policy uncertainty, while consumption is gradually recovering. The Committee remains open to further easing to anchor inflation near the 2% target.