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Investing.com-- The Reserve Bank of New Zealand cut interest rates by 50 basis points on Wednesday, as expected, citing declining inflation, and said that it has the scope to cut rates even further in 2025.
The RBNZ cut its official cash rate by 50 bps to 3.75%, in line with expectations. The cut is the RBNZ’s fourth cut since it kicked off an easing cycle in 2024.
The central bank flagged progress towards lower inflation and subdued economic growth as the biggest motivators of its rate cut, adding that “if economic conditions continue to evolve as projected, the (rate-setting) Committee has scope to lower the OCR further through 2025.
The RBNZ said New Zealand economic growth is expected to recover in 2025, with lower rates expected to boost spending. But this recovery is likely to be stifled by global economic uncertainties, especially on the trade front.
Tuesday’s cut was largely telegraphed by the RBNZ, as it works to help the New Zealand economy move past a recession.
The RBNZ had cut rates by a total of 175 basis points since August 2024. The central bank had initially planned to begin trimming rates much earlier, but its plans were delayed by sticky inflation.
But inflation has eased steadily over the past three quarters, coming within the RBNZ’s target range of 1% to 3%, and giving the central bank more headroom to cut rates.
The New Zealand dollar weakened after the RBNZ decision, with the NZD/USD pair falling 0.4%.