RBNZ to Cut Rates Again, Predicts Economic Recovery by 2027
The Reserve Bank of New Zealand (RBNZ) is set to cut interest rates again next month, with the official cash rate expected to reach 2.25% and remain there until 2026. This move comes amidst a contraction in GDP, with households and businesses expected to respond with increased spending and investment in the near term.
The latest Stats NZ data reveals a 0.9% contraction in GDP for the second quarter ending June, marking a 1.1% decline year-on-year. Despite this, the economy is forecast to accelerate, with annual growth projected to hit 2.3% by early 2027. Consumers are advised to consider fixing current mortgage rates while they remain low.
Increased government spending on infrastructure ahead of next year's election is expected to further boost economic growth. However, the RBNZ is open to further rate hikes, with the official cash rate likely to rise to 3% by mid-2027 and potentially reach 4%. A new round of monetary policy tightening is likely from late 2026 to return interest rates to neutral.
While the RBNZ's latest move aims to stimulate the economy, falling interest rates are expected to be temporary. The economy is projected to grow, with annual per capita growth set to exceed the 1.4% average recorded during the 2010s. However, the RBNZ remains vigilant, prepared to raise rates as needed to manage inflation and stabilize the economy.
