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I confirm my intention to proceed and enter this websiteThe Reserve Bank of New Zealand cut interest rates for the third time in four months on Wednesday, to 4.25%, and indicated further substantial easing, including a likely half-percentage-point cut in February, as inflation moderated toward the bank’s target. In response to the decision, the New Zealand dollar and short-term interest rates initially rose, since some in the market had expected a more aggressive 75-basis-point cut. NZDUSD surged 1.03% to close at 0.5893.
(NZD/USD Daily Price Chart, Source: Trading View)
Yet RBNZ Governor Adrian Orr poured cold water on the expectation of those in the market for a larger cut, saying there was little discussion of cutting by other than 50 basis points. He also hinted that more loosening was likely to come down the track. “Even with a 50bp cut, we remain somewhat restrictive. There is significant output gap and spare capacity, so 50bps felt appropriate,” he said in the post-policy press conference.
Analysts widely expect the central bank to cut rates by at least 25 basis points in February, though they note that many factors could change before the next meeting. The RBNZ has kept its options open regarding future moves, without attempting to temper market expectations for the pace of future cuts. Orr said that the bank does not expect to reach a neutral rate until the end of 2025, and it estimates this rate to be between 2.5% and 3.5%. The neutral rate is neither stimulative nor restrictive for the economy.
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