Reserve Bank of New Zealand Governor Orr confirms interest rate cuts in April and then may seem appropriate

The Central Bank of New Zealand, the Reserve Bank of New Zealand, cut interest rates by 50 basis points today for the third meeting in a row and signaled further easing at upcoming meetings.

The Reserve Bank of New Zealand has cut the official interest rate by half a point to 3.75%, bringing its easing in the past six months to 175 basis points.

Markets had long been expecting an aggressive move given that the economy was in a deep recession and inflation had slowed to near the midpoint of the RBNZ's 1-3% target range.

The cash interest rate remains at 3.75%, much higher than the neutral estimates, which are close to 3%, so prices remain at levels that constrain demand, and after a severe recession it is difficult to justify this and it may be necessary to reduce it below 3%.

The central bank now expects rates to fall to 3.45% by June, indicating a possible quarter-point cut as early as the April meeting, and the year-end rate is now expected to be 3.10%, down from November's estimate of 3.2%.

Orr, the governor of the Reserve Bank of New Zealand, also confirmed that interest rate cuts in April and then may seem appropriate.

The most important thing that was stated at the press conference of the governor of the Reserve Bank of New Zealand was as follows :

- The economy has a large reserve capacity.

- An interest rate cut in April and then May seems appropriate, two steps down by 25 basis points.

- Among the risks in the short term is the slowdown in economic growth.

- 3.75% is the maximum range of neutral interest rates.

- We may see faster GDP growth in New Zealand if confidence returns.

- Longer-term risks include US tariffs, which slow down global growth.

- Among the near-term risks is a slowdown in growth.

Finally, after the New Zealand dollar initially declined after the decision to cut by the Bank of New Zealand, however, the New Zealand dollar has risen after this decline at first, especially after the speech of the governor of the Bank of New Zealand, where there is no rush towards neutrality, after he indicated that the next moves will be smaller and the end of the easing cycle is no longer too far away.

It is important to note that there is no need to rush to switch to neutrality, and no tendency has been shown to go below neutrality as some analysts have speculated.

However, we see that the risks tend to larger and deeper cuts if the data does not begin to show signs of improvement, especially the upcoming data on GDP growth, which will be on March 20 before the next meeting of the Reserve Bank of New Zealand on April 8. So we'll be watching closely and see what happens in the upcoming appointments.