The Reserve Bank of New Zealand (RBNZ) is set to reduce interest rates by 25 basis points on 9th April, according to a Reuters poll of economists, who have maintained their previous forecasts as inflation is expected to stay in check.
After its most aggressive tightening cycle, the central bank has lowered rates by a total of 175 basis points since August last year, aiding an economy that has rebounded from recession, recording 0.7% growth in the final quarter of 2024.
At its February meeting, the RBNZ signalled 25-basis-point rate cuts in both April and May, with its projections showing inflation staying within the 1%-3% target range this year.
In a 31 March – 3 April poll, all 31 economists anticipated the central bank would lower its official cash rate for the fifth consecutive meeting by 25 basis points to 3.50% on Wednesday.
This consensus included all of New Zealand's largest banks, namely ANZ, ASB, BNZ, Kiwibank, and Westpac.
“It would take quite a lot to cause the Reserve Bank to diverge from their stated plan, given they think the neutral rate is 3.00%. We're still above that level, and while the economy is strengthening, it's crawling out of a hole,” according to Sharon Zollner, chief economist at ANZ.
“I would describe a cut next week as a near certainty, a follow-up cut in May as highly likely and a third cut in July as more of a coin toss.”
Nearly 90% of economists (24 out of 27) anticipate another 25-basis-point rate cut in May. The average forecast also projects an additional cut in the third quarter, bringing the interest rate to 3.00% by the end of September.
Among those forecasting year-end rates, 16 of 26 respondents expect the policy rate to be at 3.00% or lower. Ten predict 3.25%, while two foresee 2.75% and another two project 2.50%.
A reduction to 3% would imply the RBNZ plans to cut rates by a total of 250 basis points, reflecting a relatively dovish stance compared to the Reserve Bank of Australia and the US Federal Reserve.