RBNZ cuts cash rate by 25 basis points

by / ⠀News / August 16, 2024
cash cuts

The Reserve Bank of New Zealand (RBNZ) has cut its official cash rate by 25 basis points to 5.25%. This is the first rate cut in over four years. The central bank has also signaled that more easing is likely in the future.

Expectations are that the rate could drop to 3.85% by the end of 2025. The unexpected move caused the New Zealand dollar to tumble, and markets began to anticipate a more aggressive easing path.

Current market pricing suggests that the policy rate could be near 3.0% by 2025. This action aligns New Zealand with the global trend of monetary easing. Central banks worldwide are responding to slowing economic growth and inflation pressures.

The rate cut is expected to provide a modest boost to the Kiwi economy. It will lower borrowing costs for businesses and consumers.

RBNZ’s first rate cut in years

It may help revive the housing market, which has shown signs of cooling in recent months. However, some analysts have warned that the cut may not be enough to counteract broader global economic trends. The trade war between the U.S. and China casts a long shadow over international trade.

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Ongoing geopolitical tensions are contributing to an uncertain economic outlook. Initial market reactions to the rate cut were mixed. In the immediate aftermath of the announcement, the New Zealand dollar weakened against the U.S. dollar.

This reflects market expectations of easier monetary policy. On the other hand, the New Zealand stock market showed a positive response. The NZX 50 index rose as investors welcomed the central bank’s proactive stance.

Looking ahead, the RBNZ has indicated that it remains vigilant and will continue to monitor economic indicators closely. Depending on the financial data and global economic developments in the coming months, further rate cuts have not been ruled out.

About The Author

Kimberly Zhang

Editor in Chief of Under30CEO. I have a passion for helping educate the next generation of leaders. MBA from Graduate School of Business. Former tech startup founder. Regular speaker at entrepreneurship conferences and events.

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