RBNZ Cuts Rates By 50 Basis Points, NZD/USD Falls To Seven-Week Low
The Reserve Bank of New Zealand (RBNZ) cut its official cash rate by 50 basis points to 4.75% at its October policy meeting, in line with widespread market expectations.
The New Zealand Dollar fell sharply against the US Dollar on Wednesday, touching a seven-week low.
The NZD's sharp move came as the Reserve Bank of New Zealand (RBNZ) earlier cut the official cash rate by 50 basis points to 4.75% at its October policy meeting, in line with widespread market expectations.
In a statement, the RBNZ noted that the cut was aimed at “achieving and maintaining low and stable inflation, while avoiding unwarranted volatility in output, employment, interest rates and the exchange rate”.
According to the minutes of the RBNZ policy meeting, annual inflation is expected to return to the central bank's target range of 1% to 3% in the third quarter.
New Zealand's annual Consumer Price Index (CPI) inflation has fallen to a three-year low of 3.3% in the second quarter of 2024, a significant slowdown from 4% in the first quarter.
The RBNZ noted, “The New Zealand economy is currently in a state of overcapacity, which has contributed to an adjustment in price and wage setting to a low-inflation economic environment. Falling import prices have also helped inflation to fall back.”
According to analysis by ANZ Chief Economist Sharon Zollner, “There was no indication in today's statement that the market should stop expecting another 50 basis point cut in November.”
The NZD/USD pair fell to a low of 0.6073 at one point after the policy announcement.
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