The official cash rate in New Zealand has been reduced by 50 basis points to 4.25 percent, with another similar cut expected after the next meeting in February. This decision aligns with economists’ predictions and follows two consecutive 50 bps cuts since August. Governor Adrian Orr cautioned mortgage holders not to expect significant changes from their banks due to high international borrowing costs.
However, major banks like ANZ, BNZ, Kiwibank, Westpac, and Co-operative Bank have responded positively by announcing rate reductions. Some banks cited protecting savers as the reason for not passing on the full rate cut. The Monetary Policy Statement indicated a slower pace of cuts next year, with the OCR projected to reach around 3.5 percent by the end of 2025.
Prime Minister Christopher Luxon attributed the rate cut to the government’s austerity measures, but Orr humbly acknowledged the collective effort behind the success. He urged banks to reduce mortgage pressures by increasing their margins towards the long-term average, hoping for more competition and decreased margins in the future.
Despite the positive news for homeowners and retailers, the Reserve Bank’s decision reflects concerns about the economy’s long-term outlook. While a slight improvement in GDP is forecasted for the coming years, global economic uncertainties and geopolitical tensions could impact New Zealand’s growth prospects. Orr emphasized the importance of maintaining inflation within the target range to respond effectively to any future shocks.
Looking ahead, the Bank’s new unemployment forecasts offer some hope for job seekers. Orr concluded his speech by acknowledging the challenges faced by New Zealanders and encouraged investment in projects that enhance the country’s productivity. Finance Minister Nicola Willis welcomed the rate cut as good news for families and businesses, emphasizing the government’s commitment to supporting the economy and reducing public sector spending. Please rewrite the sentence.
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