The Reserve Bank has cut the Official Cash Rate by 25 basis points to 3.25%.
The move was widely expected by economists and had been priced in by financial markets.
“The New Zealand economy is recovering after a period of contraction. High commodity prices and lower interest rates are supporting overall economic activity,” the RBNZ said.
But recent developments in the international economy were expected to reduce global economic growth, it said.
“Both tariffs and increased policy uncertainty overseas are expected to moderate New Zealand’s economic recovery and reduce medium-term inflation pressures. However, there remains considerable uncertainty around these judgements.”
It will also be the first public outing for the new acting Reserve Bank Governor, Christian Hawkesby, who will host a media conference at 3pm, after the statement is released at 2pm.
Hawkesby faces a difficult balancing act with US trade policy creating a great deal of uncertainty about the economic outlook.
Lower global growth projections, based on trade disruptions, have raised expectations that the RBNZ will have to cut the rate to a lower level than was forecast in February.
At the time, the RBNZ was projecting a pause at 3.25%, with the prospect of cutting to 3% by the end of the year.
Since then, commercial bank economists’ forecasts have shifted to a low point of 2.75% or 2.5% by the end of the year.
“We think the end point for the RBNZ’s OCR [Official Cash Rate] track will be lower relative to the February MPS [Monetary Policy Statement] – reflecting the risks to growth, but not by as much as market consensus,” ASB economist Wesley Tanuvasa said.
“We still think the RBNZ will need to provide modest policy support by way of a 2.75% year-end OCR. But it’s a highly uncertain and changeable environment, including for estimates of where the OCR ends up.”
Westpac chief economist Kelly Eckhold said he expected the RBNZ would still assess the economy as being on a “recovering trend”.
“However, it will probably view the recovery in domestic activity as somewhat weaker than hoped, but stronger than expected in externally focused sectors.”
Eckhold expected the RBNZ to present downside and upside scenarios.
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