ICYMI – RBNZ cut its cash rate by 25bp, market consensus was for on hold

Earlier:

• Reserve Bank of New Zealand announce cash rate cut to 5.25%
• NZD/USD marked lower after the Reserve Bank of New Zealand cut its cash rate

I’m glad I got my forecast the right way! RBNZ Governor Orr doesn’t wait around for a bazillion confirmations, he just goes and gets it done. A bit like Wheeler before him:

• I’m going out on a limb, not very much though I reckon, with a 25bp rate cut.

Reserve Bank of New Zealand from the statement:

• sees
  official cash rate at 4.1% in September 2025 (pvs 5.4%)
• sees TWI NZD at around 69.5% in September 2025 (pvs 71.0%)
• sees official cash rate at 4.92% in December 2024 (pvs 5.65%)
• sees official cash rate at 3.85% in December 2025 (pvs 5.14%)
• sees annual CPI 2.4% by September 2025 (pvs 2.2%)
• sees official cash rate at 2.98% in September 2027
• Inflation is declining
• Inflation returning into target band
• Service inflation expected to decline
• Pace of further easing will depend on commitee’s confidence that
  pricing behaviour remains consistent with a low inflation environment
• CPI expected to remain target mid-point over foreseeable future

RBNZ from the meeting minutes:

• Weakening
  in domestic economic activity observed in the July Monetary Policy
  Review has become more pronounced and broad-based
• Members noted that monetary policy will need to remain restrictive
  for some time to ensure that domestic inflationary pressures continue
  to dissipate
• New Zealand’s economic activity and near-term inflation indicators
  now resemble those in countries in which central banks have started
  cutting policy rates
• The pace of further easing will thus be conditional on the
  Committee’s confidence that pricing behaviour is continuing to adapt
  to a low-inflation environment
• A broad range of high-frequency indicators point to a material
  weakening in domestic economic activity in recent months
• Recent indicators give confidence that inflation will return
  sustainably to target within a reasonable time frame
• The output gap is now assessed to be more negative than was
  assumed in the May Monetary Policy Statement, indicating increased
  spare capacity
• Headline CPI inflation expected to return to the target band in
  the September quarter
• Committee agreed there was scope to temper the extent of monetary
  policy restraint
• Alongside restrictive monetary policy, an earlier or larger impact
  of tighter fiscal policy could be constraining domestic demand
• The Committee observed that the balance of risks has progressively
  shifted since the May Monetary Policy Statement
• While domestic financial conditions remain restrictive, they have
  loosened over recent months
• Broad range of indicators suggesting the economy is contracting
  faster than anticipated
• Committee felt that the OCR track in the projection reflected its
  view on the policy strategy that would best deliver on its remit

The Bank quick to update its front page:

This article was written by Eamonn Sheridan at www.forexlive.com.