Official Cash Rate live updates: Reserve Bank Governor Adrian Orr speaks after OCR cut by 50 basis points to 3.75%
The Reserve Bank has cut the Official Cash Rate (OCR) by 50 basis points in its February Monetary Policy Statement.
The move takes the OCR from 4.25% to 3.75%, and retail banks have moved quickly to cut some home loan and other rates.
ARTICLE CONTINUES AFTER LIVE BLOG
Adrian Orr on future risks
Cameron Smith
"One risk was that the economic recovery took longer than expected," Orr said.
The "slightly longer term risk" was the geopolitical fragmentation the world was seeing. "We don't know what's going to happen with tariffs."
Adrian Orr responds to rate track change
Cameron Smith
"We've moved on. We've seen more data and we're more confident than we were in November," Orr told media.
Reserve Bank's Adrian Orr speaks to media
Cameron Smith
"We are looking at lowering the official cash rate quicker than we projected in November," RBNZ Governor Adrian Orr said at the press conference. "We are easing with more regular graduation from here."
"What we're looking at is an economy that is growing slower than the potential growth rate... So we still have downward pressure on inflation," Orr said.
‘More cuts, sooner’ – Kiwibank economist
Cameron Smith
"The main message from today's MPS is the lowering (again) of the OCR track," said Kiwibank chief economist Jarrod Kerr.
"The RBNZ are signalling more cuts, sooner. The RBNZ has effectively matched market pricing, and moved closer to our long-held view of a 3% terminal rate. There's only 10bps between us now. It pays to be stubborn. And we agree with the move. We're all on the same page, now."
ANZ and Westpac lower home lending rates
Cameron Smith
ANZ dropped its floating home loan rate by 50bps to 6.89% and its flexible loan rate to 7% – the lowest it has been since October 2022.
Grant Knuckey, ANZ NZ managing director for personal banking, said the cuts to floating and flexible rates will provide extra relief for customers who have yet to fix their home loans.
“Interest rates have fallen significantly in a relatively short period – 175 basis points of Official Cash Rate cuts since August last year.
“At the moment around 12% of ANZ home loan accounts are on floating rates – that’s a higher-than-usual number, and a reflection of the falling interest rate environment,” Knuckey said.
Westpac only passed on 40bps to its floating home loan rates cutting its choices floating rate to 6.99%. But it did shave a bit off its fixed term rates.
Westpac's biggest fixed rate cut was on its three year rate dropping it 40bps to 5.39% for its special rate and 5.99% for its standard rate.
Nicola Willis praises OCR cut, Chris Hipkins hits out at Government
Cameron Smith
Finance Minister Nicola Willis answered questions from her own MPs praising today’s cut and anticipated future cuts and their “direct impact on New Zealand families”.
Labour was quick to argue the forecast cuts should be blamed on the Government, which has squeezed inflation out of the economy by slowing growth and raising unemployment.
As Willis praised the projected cuts, Labour leader Chris Hipkins interjected the cuts were needed because “she [Willis] is tanking the economy”.
As Willis acknowledged there were risks to the economic outlook, Hipkins interjected: “she’s one of them”.
Banks drop mortgage rates
Cameron Smith
Kiwibank, ASB and The Co-operative all announced changes to mortgage and term deposit rates at the same time as the OCR drop.
ASB sliced 50 basis points off its variable and business loan rates and also trimmed the same amount off its savings and on call rates.
ASB's variable home loan rate will drop to 6.89% while its back my build rate will be dropped to 4.44%.
Kiwibank's variable home loan rate will fall from 7.25% to 6.75% as of Monday for new lending and March 10 for existing loans.
The Co-operative said it would pass through the full 50bps cut to its floating home loan rate, which would drop to 6.45% but would not pass on the full cut for savers.
Reserve Bank cuts Official Cash Rate to 3.75%
Cameron Smith
The Reserve Bank has today cut the Official Cash Rate by 50 basis points to 3.75%.
Cameron Smith
Official Cash Rate call nears
Cameron Smith
Welcome to the Herald’s live coverage of the Reserve Bank's first Official Cash Rate decision for 2025.
The Reserve Bank will publish a full monetary policy statement at 2pm today, followed by a press conference from Governor Adrian Orr at 3pm.
The Herald will keep you updated throughout the afternoon.
ARTICLE CONTINUES
The Reserve Bank (RBNZ) this afternoon said economic activity was still subdued.
“With spare productive capacity, domestic inflation pressures continue to ease.”
Economic growth was expected to recover during 2025, the RBNZ said.
“Lower interest rates will encourage spending, although elevated global economic uncertainty is expected to weigh on business investment decisions,” it said in today’s Monetary Policy Statement.
“Higher prices for some of our key commodities and a lower exchange rate will increase export revenues. Employment growth is expected to pick up in the second half of the year as the domestic economy recovers.”
It said consumer price inflation in New Zealand was expected to be volatile in the near term, due to a lower exchange rate and higher petrol prices.
“The net effect of future changes in trade policy on inflation in New Zealand is currently unclear. Nevertheless, the committee is well placed to maintain price stability over the medium term.”
Kiwibank chief economist Jarrod Kerr said the main message from today’s MPS was the further lowering of the OCR track.
“The RBNZ are signalling more cuts, sooner. The RBNZ has effectively matched market pricing, and moved closer to our long-held view of a 3% terminal rate,” he said.
“There’s only 10bps between us now. It pays to be stubborn. And we agree with the move. We’re all on the same page, now.”
Kerr explained the key dates: “the OCR track implies a 25bp cut in April and May to 3.25%. And then there is a welcome drop to 3.14% to end the year. And the track flatlines at 3.1% out to 2028.
“That’s the RBNZ’s way of saying there’s a 60% chance they go from 3.25% to 3%. You know, it’s kind of needed, but we’re not quite there yet. In time, they should get to 3%. And the risks are to the downside.”
Westpac senior market strategist Imre Speizer said the main surprise was that the Reserve Bank had lowered its forecast interest rate track, bringing it into line with market expectations.
The track now suggests a 25 basis points cut in April and another quarter pointer in May.
“So interest rate yields may fall further on this, and the currency may fall further,” Speizer said.
The “terminal rate” – where the RBNZ expects the OCR to eventually settle, was 3.1%, unchanged.
POLITICAL REACTION
In Parliament, the Government was quick to some credit for the cut.
Finance Minister Nicola Willis answered questions from her own MPs, praising today’s cut and anticipated future cuts and their “direct impact on New Zealand families”.
Labour was quick to argue the forecast cuts should be blamed on the Government, which has squeezed inflation out of the economy by slowing growth and raising unemployment.
As Willis praised the projected cuts, Labour leader Chris Hipkins interjected the cuts were needed because “she [Willis] is tanking the economy”.
As Willis acknowledged there were risks to the economic outlook, Hipkins interjected: “she’s one of them”.
BANKS MOVE
Kiwibank, ASB and The Co-operative Bank all announced changes to mortgage and term-deposit rates at the same time at the OCR drop.
ASB sliced 50 basis points off its variable and business loan rates and also trimmed the same amount off its savings and on call rates.
ASB’s variable home loan rate will drop to 6.89% as of Friday for new customers, and February 28 for existing customers.
And its ”Back my Build” rate available to those who build a new home from scratch, or buy a home-and-land package, will be dropped to 4.44%.
Kiwibank’s variable home loan rate will fall from 7.25% to 6.75% as of Monday for new lending, and on March 10 for existing loans.
EARLIER TODAY
While economists viewed a 50-basis-point cut as highly likely, they were less certain about how far it will be cut in the months ahead.
Much of the focus of today’s announcement will be on the RBNZ’s new forecasts and its projected track for the rate.
The bank will have to weigh the ongoing sluggishness of the economy against concerns about the potential for inflation to reignite.
“In our opinion, it should publish a quicker decline in rates than it did back in November,” BNZ head of research Stephen Toplis said.
“Our view is that the cash rate should be cut 25 basis points per meeting, following the 50 in February, until such time that the bank thinks it’s done enough.”
That could mean the OCR falls to 2.75%, Toplis said.
But others are more cautious.
ANZ economists are picking just one more 25-basis-point cut – taking the rate to 3.5%.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up for his weekly newsletter, click on your user profile at nzherald.co.nz and select “My newsletters”. For a step-by-step guide, click here.