Wellington – In a bold move to arrest economic cooling, the Reserve Bank of New Zealand (RBNZ) on October 8 cut its Official Cash Rate (OCR) by 50 basis points, bringing it to 2.50%, the lowest level in over three years.

The Monetary Policy Committee (MPC) cited weak domestic demand, spare capacity in the economy, and elevated inflation pressures as motivations. While headline inflation touched 3.0% in the September quarter, the bank expects inflation to return toward its 2% midpoint by mid-2026.

Economic activity through mid-2025 has been uneven, with some sectors hampered by global headwinds and domestic supply constraints. Household consumption has shown tentative signs of recovery, aided by lower interest rates, although residential and business investment remain soft.

The RBNZ also left the door open to further cuts, committing to adjust the OCR further if needed to steer inflation sustainably toward target.

Markets moved rapidly: the New Zealand dollar fell, bond yields dropped, and borrowing rates for mortgages and business loans are expected to follow lower.

Officials hope the aggressive front-loaded cut sends a strong stimulus signal to businesses and households, reinforcing confidence and supporting growth.

However, risks remain: if inflation remains sticky, or global pressures intensify, the RBNZ may need to reverse course or temper further easing.