RBNZ Cuts Rates Further to Spark Recovery

By James Glynn

SYDNEY--The Reserve Bank of New Zealand lowered interest rates further on Wednesday in an effort to spur recovery in the economy that for now remains moribund, with unemployment at its highest level in nearly a decade.

The official cash rate was lowered to 2.25% from 2.50%, bringing the total reduction since mid-2024 to 325 basis points.

In announcing the cut, the RBNZ said that while annual inflation is near the top of the 1% to 3% target band, there was plenty of excess capacity in the economy, and price pressures would ease over time.

"The significant reduction in the OCR since August 2024 is expected to support a recovery in economic activity," it added.

Economists are more upbeat about the potential for the economy to recover next year, but for now the unemployment rate remains well above 5.0% and a lack of job opportunities is driving strong migration out of the country toward Australia.

The weakness in the job market comes after economic growth stalled in the second quarter, with national output contracting by 0.9% from the first quarter. Growth was flat in annual terms.

The RBNZ said it considered how U.S. tariff policy announcements and broader geoeconomic uncertainty disrupted New Zealand's nascent economic recovery.

"Greater uncertainty likely led to increased precautionary behavior by households and businesses, dampening consumption and investment," it said.

Firms are reporting that it is relatively easy to find workers, the RBNZ said.

"While job losses are not high compared to past economic downturns, job vacancies and job transitions have been low, so it has been relatively difficult for unemployed people to transition back to work," it added.

The committee voted 5 to 1 to reduce the OCR.

"The committee noted that a reduction in the OCR would help to underpin consumer and business confidence and lean against the risk that the economy recovers more slowly than needed to meet the inflation objective," it added.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

November 25, 2025 20:59 ET (01:59 GMT)