By Devayani Sathyan
BENGALURU (Reuters) -The Reserve Bank of New Zealand will lower its key interest rate to 3% on Wednesday to support the economy amid contained inflation and labour market weakness, a Reuters poll showed.
In July, the central bank held rates at 3.25%, citing near-term inflation risks, but signaled readiness to ease if price pressures fell. Inflation was at 2.7% in the last quarter, within the RBNZ’s 1-3% targeted range, and expectations have edged lower.
But the jobless rate climbed to 5.2% in the second quarter, the highest since late 2020. That, along with broad economic weakness, is likely to nudge the central bank to cut rates to support a recovery.
Over 90% of economists surveyed, or 28 of 30 in an August 11-14 Reuters poll, expected the RBNZ to cut its official cash rate by 25 basis points to 3% on August 20. Two expected no change.
“The bank signalled reasonably clearly at the last review it was going to resume the path of cutting if the economy continued to come out as expected in terms of some of the weakness that we’ve seen across indicators and if inflation remains more or less in line with their forecasts. Both of those have occurred,” said Gareth Kiernan, director at Infometrics.
“We’re expecting a cut by the Reserve Bank to take the official cash rate down to 3%.”
While economists agreed the RBNZ was nearing the end of its easing cycle, there was no consensus on the terminal rate or when it would be reached.
Among major New Zealand banks, ASB and Westpac did not anticipate further easing after next week’s possible cut. BNZ sees rates at 2.75% by end-2025 while ANZ and Kiwibank expect rates to fall to 2.50% next year.
Of the 29 respondents who forecast rates through year-end, 14 saw them at 3%, 14 expected 2.75% and one predicted rates to stay at 3.25%.
The median forecast showed an additional cut in the first quarter of 2026 to 2.75%, slightly earlier than the second quarter predicted in a July poll.
(Other stories from the August Reuters global economic poll)
(Reporting by Devayani Sathyan; Polling by Veronica Khongwir and Vijayalakshmi Srinivasan; Editing by Hari Kishan, Ross Finley and Bernadette Baum)
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