(Bloomberg) -- New Zealand’s central bank cut interest rates to a fresh record low and signaled the chance of one further reduction amid slowing global growth and weak inflation.
“The Monetary Policy Committee decided a lower OCR is necessary to support the outlook for employment and inflation consistent with its policy remit,” the Reserve Bank said after lowering the official cash rate a quarter of a percentage point to 1.5 percent. “A lower OCR now is most consistent with achieving our objectives and provides a more balanced outlook for interest rates.”
The RBNZ becomes the first central bank in the developed world to begin loosening policy this cycle, which should exert downward pressure on the New Zealand dollar and boost the inflation outlook. In late March, Governor Adrian Orr said the more likely direction of the next OCR move was down and since then economic data have been softer than expected. The inflation rate fell to 1.5 percent in the first quarter and hiring declined.
New Zealand’s dollar fell after the report. It bought 65.67 U.S. cents at 2:06 p.m. in Wellington from 66.02 cents immediately before the statement.
The RBNZ’s projections today show another rate cut is possible. They show the average OCR dropping to 1.48 percent by the end of this year and 1.36 percent by the third quarter of 2020. The benchmark rate had been at 1.75 percent since November 2016.
