Wellington, Aug 20 New Zealand's central bank on Wednesday lowered the Official Cash Rate (OCR) by 25 basis points to 3 per cent.
Annual consumer price inflation currently sits near the top of the 1-to-3 per cent target band but is expected to return to the 2 per cent midpoint by mid-2026 due to easing domestic inflation pressures and spare economic capacity, according to a statement by the Reserve Bank of New Zealand's Monetary Policy Committee.
The country's economic recovery stalled in the second quarter amid global economic policy uncertainty, falling employment, higher essential costs, and declining house prices, it said.
Looking ahead, cautious household and business behaviour could slow growth further, though the economic recovery might accelerate as recent interest rate cuts take effect, Xinhua News Agency reported, quoting the committee.
Future OCR decisions will depend on further data on the speed of New Zealand's economic recovery, with potential for further reductions if medium-term inflation pressures continue to ease, it added.
Finance Minister Nicola Willis said falling interest rates are good for growth, businesses, jobs and Kiwis paying off their mortgages.
"The latest reduction means the OCR has now fallen from 5.5 per cent to 3 per cent in just a year," Willis said, welcoming the bank's decision to respond to a difficult second quarter of the year with more stimulus.
Meanwhile, New Zealand's food prices rose 5 per cent in the year to July 2025, up from 4.6 per cent the year before, the statistics department Stats NZ said on August 15.
The grocery food group rose 5.1 per cent, led by dairy price hikes, with milk up 16 per cent, butter 42.2 per cent, and cheese 29.5 per cent, Stats NZ said, adding that since July 2020, milk prices have jumped nearly 34 per cent, the biggest driver of overall food inflation.
Meat, poultry, and fish prices rose 7.9 per cent, led by beef steak up 24.6 per cent and mince 19.3 per cent, while fruit and vegetables climbed 7.3 per cent, non-alcoholic drinks 4.4 per cent, and restaurant meals 2.2 per cent.
In contrast, rent prices increased 2.4 per cent in the year to July, the slowest rate of increase since 2011, said Stats NZ prices and deflators spokesperson Nicola Growden.
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