Reserve Bank cuts OCR by 50bp to 3.75%

19th February 2025 By Paul Yandall | paul@propertyticker.co.nz | @propertyticker

The Reserve Bank has cut the Official Cash Rate by 50 basis points to 3.75%.

The bank’s Monetary Policy Committee made the announcement on Wednesday afternoon, and added that if economic conditions continue to evolve as projected, it could lower the OCR further throughout the year.

In its Monetary Policy Statement, the Reserve Bank’s governor, Adrian Orr, said annual consumer price inflation remained near the mid-point of its 1% to 3% target band.

“The economic outlook remains consistent with inflation remaining in the band over the medium term, giving the committee confidence to continue lowering the OCR,” Orr said.

“Economic growth is expected to recover during 2025. Lower interest rates will encourage spending, although elevated global economic uncertainty is expected to weigh on business investment decisions.” 

While consumer price inflation was expected to be volatile in the near term, due to a lower exchange rate and higher petrol prices, and the impact of international trade conditions uncertain, the Reserve Bank said it was “well placed” to maintain price stability over the medium term.

“If economic conditions continue to evolve as projected, the committee has scope to lower the OCR further through 2025,” Orr said.

The committee noted that wholesale interest rates in New Zealand have generally declined since November, when the OCR was lowered by 50 basis points to 4.25%.

“This decline in wholesale interest rates has been reflected in lower mortgage and term deposit rates,” stated the bank.

“The average interest rate on outstanding mortgages has now peaked and is expected to decline over the next 12 months as borrowers refix their mortgage interest rates at lower levels.”