RBNZ Delivers 25bps Rate Cut as Expected

The Reserve Bank of New Zealand lowered its Official Cash Rate by 25 bps to 3% at its August 2025 meeting, aligning with market expectations and bringing borrowing costs to its lowest level since August 2022.

The Committee reached its decision with a 4–2 majority, acknowledging both upside and downside risks to the economic outlook.

Inflation edged up to 2.7% in Q2 2025 from 2.5% previously, remaining within the MPC’s 1–3% target range.

However, it is projected to reach 3% in Q3, driven by rising administered prices, food costs, and prices of other tradable goods and services.

On the growth front, GDP contracted by 0.7% year-on-year in Q1, with high-frequency data indicating another decline in Q2 and a rebound expected in Q3.

Elsewhere, the MPC noted that tariffs and policy uncertainty are weighing on the global outlook.

While trade volumes remain resilient, shifting patterns and higher-than-expected US tariffs on New Zealand exports may challenge some industries and exporters.