2025.08.2002:24:35UTC+00RBNZ Delivers 25bps Rate Cut as Expected

The Reserve Bank of New Zealand reduced its Official Cash Rate by 25 basis points, settling at 3% during its August 2025 meeting. This decision was anticipated by the market, marking the lowest borrowing costs since August 2022. The Committee made this decision with a 4-2 majority, considering both potential positive and negative impacts on the economic outlook. Inflation rose to 2.7% in the second quarter of 2025, up from 2.5% previously, but remained within the Monetary Policy Committee's target range of 1-3%. However, it is expected to reach 3% in the third quarter, propelled by rising administered prices, food costs, and prices of other tradable goods and services. On the growth side, GDP contracted by 0.7% year-on-year in the first quarter, with high-frequency data indicating a further decline in the second quarter but suggesting a rebound in the third quarter. Additionally, the Monetary Policy Committee observed that tariffs and policy uncertainty are negatively affecting the global economic outlook. Although trade volumes have shown resilience, changing patterns and higher-than-expected U.S. tariffs on New Zealand exports may present challenges for certain industries and exporters.