The Reserve Bank of New Zealand (RBNZ) has delivered a widely expected 0.25 percentage point cut to the Official Cash Rate (OCR), and more reductions could be on the way.
Kelvin Davidson, Chief Property Economist for Cotality NZ, said today’s move was anticipated following the Monetary Policy Committee’s July meeting, with recent economic and inflation data evolving broadly as expected.
The Committee debated holding the rate steady or opting for a larger 0.5 percentage point cut before settling on the 0.25 reduction in a 4–2 vote.
Mr Davidson noted this “menu of options has a downwards bias” and indicates that further cuts are likely.
The accompanying Monetary Policy Statement (MPS) forecasts GDP may not yet have bottomed out, with a possible 0.3% contraction in Q2, while unemployment could still edge higher.
Inflation may rise temporarily due to imported costs, but spare capacity in the economy is expected to limit its persistence.
Mr Davidson said another one or even two cuts could be delivered in the months ahead; the RBNZ’s own projections suggest the OCR could trough near 2.5% by mid-2026.
For the housing market, today’s cut is expected to have only a modest effect.
While the potential for lower mortgage rates may lift buyer activity slightly, weak economic and labour market conditions remain a drag.
“Job security concerns may see many borrowers use savings from lower repayments to pay down debt faster, rather than spend in the economy or property market,” Mr Davidson said.
He added that the subdued tone of the first eight months of 2025 may well persist into the remainder of the year.
