Interest rates in New Zealand are again back in the basement, with a fresh 25 basis point cut taking the official cash rate to 2.25 per cent.
The Reserve Bank of New Zealand (RBNZ) made the latest cut on Wednesday in its final monetary policy review of 2025.
And that is likely to be 'all she wrote' in terms of Kiwi cuts, with the RBNZ's updated tracking showing rates at the bottom of this easing cycle.
"If the economic recovery underwhelms, then the RBNZ could cut again. But, barring nasty surprises, the RBNZ looks on hold now," ASB chief economist Nick Tuffley said.
ANZ chief economist Sharon Zollner agreed, saying: "Unless the economy is hit with some kind of unexpected negative shock, the OCR is not going any lower".
The move was in line with market expectation, and means the central bank has slashed the official cash rate (OCR) by 325 basis points in 15 months.
RBNZ governor Christian Hawkesby, in his last week in the role before Swedish hire Anna Breman takes over, said the monetary policy committee voted 5-1 for the 25 basis points cut, with the dissenting voice calling to hold.
"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," he said.
At 2.25 per cent, New Zealand's benchmark rate is now considerably lower than Australia's cash rate target at 3.6 per cent.
What the two allies could have in common is that these rates may be the lowest that central banks are willing to go in this cutting cycle.
The updated tracking pathway shows the cash rate bottoming out at 2.2 per cent through 2026, implying a 20 per cent chance of another 25 basis point cut, with hikes appearing on the horizon in 2027.
Mr Hawkesby said the track's "very slight downward tilt" was a "nod to the likelihood that if the OCR was to change over the next three to six months, it might be more likely to go down than up".
After shocking GDP results in recent months, Finance Minister Nicola Willis welcomed the cash rate call and forecasts for improved growth across the next year.
"It is clear previous reductions in the OCR are flowing through into stronger economic activity," she said.
"The bank is forecasting falling inflation and rising growth. Its forecasts support the widespread consensus that the economy is strengthening."
Mr Hawkesby said an analysis of the -0.9 per cent GDP result in the June quarter showed the economy "was not as weak as that headline number suggested".
He struck an optimistic note on the Kiwi economy, saying lower interest rates were "supportive and stimulatory".
"We're not waiting for a recovery. It's happening right now through Q3 and Q4," he said.
