By Lucy Craymer
WELLINGTON (Reuters) -New Zealand's central bank surprised some in the markets by slashing its benchmark rate by 50 basis points to 2.50% on Wednesday, and kept the door open for further
easing, suggesting policymakers were worried about the frail state of the economy.
The New Zealand dollar tumbled in the wake of the move, as investors bet policymakers will keep injecting more stimulus to shore up demand in the coming months.
The decision went against 15 of 26 economists surveyed in a Reuters poll who had forecast the Reserve Bank of New Zealand would cut the official cash rate by 25 basis points.
However, the larger cut wasn't totally unexpected as the remaining 11 economists had picked a 50-bp reduction and markets were primed for the RBNZ to pull harder on its monetary policy levers to inject impetus to a weakened economy.
The central bank has cut rates by 300 basis points since August 2024, and with inflation within its target band of 1% to 3%, policymakers have leeway to lower borrowing costs further.
“The Committee reached consensus to reduce the official cash rate by 50 basis points to 2.5 percent,” the RBNZ said in its accompanying policy statement. “The Committee remains open to further reductions in the OCR as required for inflation to settle sustainably near the 2 % target mid-point in the medium term.”
The New Zealand dollar fell 0.96% to $0.5743 after the decision.
(Reporting by Lucy CraymerEditing by Shri Navaratnam)
