Live updates: Reserve Bank cuts Official Cash Rate to 3%
Cameron Smith
These live updates are now over.
Business Editor at Large Liam Dann explains what to expect
Scott Palmer
Housing market may remain subdued this year
Cameron Smith
Kelvin Davidson, chief property economist for Cotality NZ, said the housing market effects from the OCR cut were likely to be small.
"If anything, the possibility of more falls in mortgage rates than previous thought could lift activity and house prices a bit. But those rate changes may be fairly minor. And in the meantime, as the RBNZ has indicated, the economic and labour market outlook is still disappointing – which will tend to weigh on housing, as it’s already doing."
Davidson said concerns about job market security may mean borrowers who roll off higher fixed-term rates on to lower rates may choose to save their extra cash or reduce the term of their loan.
"All in all, the rest of 2025 for NZ’s housing market may be just as subdued as the first 7-8 months of the year."
'Highly uncertain economic outlook'
Cameron Smith
ASB economists now expect a further 50bps of cuts before the end of the year, which would take the OCR to 2.5%.
"OCR moves remain conditional on the highly uncertain economic outlook, with both upside and downside risks.
"With few catalysts that would kickstart a domestic expansion and with fiscal buffers needing to be restored, more of the onus of policy support has fallen on the OCR. Every OCR decision before the end of the year looks to be effectively 'live'."
Co-operative Bank cuts home loan rate
Cameron Smith
The Co-operative Bank cut its floating home loan rate by 25 basis points to 5.7% immediately after the OCR cut.
BNZ picks two more rate cuts in current cycle
Cameron Smith
BNZ head of research Stephen Toplis said that in light of today's "dovish" statement, he was adding an extra rate cut to BNZ's expected rate track.
"In addition to the 25-point cut to 3% today, we maintain our view that a further 25-point reduction will be delivered in October. We now add to that an expectation of a final 25-point cut at the November statement, taking the low in the cash rate track to 2.5%.
"Our previous expectation was for a low of 2.75% with downside risk."
Retail NZ boss praises cut
Cameron Smith
Retail NZ chief executive Carolyn Young said the organisation was delighted by the Reserve Bank's decision.
"A turnaround in the economy can't come soon enough for the retail sector.
"Consumer confidence remains fragile and discretionary spending is being squeezed by persistent inflation in essentials like food, electricity and insurance. We have yet to see the boost expected from lower interest rates as more consumers refix their mortgages."
Interest rate track surprise
Cameron Smith
"The key detail here is that there was a split vote, with two members voting to cut by 50 basis points," ANZ market strategist David Croy said.
"And the interest rate track was lowered by a lot more than anybody expected.
"The Kiwi dollar is a lot lower and you're going to see wholesale interest rates continue moving lower today."
Nicola Willis welcomes OCR cut
Cameron Smith
Finance Minister Nicola Willis welcomed the OCR cut today.
"Lower interest rates support businesses to expand and grow, support increased construction activity, create jobs and put more money in people’s pockets."
She said the lower OCR meant repayments on a 25-year $500,000 floating rate mortgage were about $330 less a fortnight now than they were a year ago.
"That makes a big difference to the family budget and as more mortgages come up for refinancing, more households will benefit."
Cameron Smith
The RBNZ's new projected rate track suggests an OCR of 2.5% by March 2026 – that implies another two 25 basis point cuts to come in this cycle.
Cameron Smith
Cameron Smith
The committee discussed three policy options: keeping the OCR on hold at 3.25%; cutting the OCR by 25bps to 3%; or cutting by 50bps to 2.75%.
The committee voted on the options of either reducing the OCR by 25bps or 50bps. By a majority of 4 votes to 2, the committee agreed to decrease the OCR by 25bps to 3%.
Cameron Smith
New Zealand’s economic recovery stalled in the second quarter of this year, the Reserve Bank said.
Spending by households and businesses has been constrained by global economic policy uncertainty, falling employment, higher prices for some essentials and declining house prices.
Reserve Bank cuts Official Cash Rate to 3%
Cameron Smith
The Reserve Bank has cut the Official Cash Rate by 25 basis points from 3.25% to 3%.
Reserve Bank Governor to speak at 3pm
Cameron Smith
Reserve Bank Governor Christian Hawkesby will hold a press conference at 3pm, which will be livestreamed here.
Cameron Smith
A case for holding the OCR
Cameron Smith
While expectations are for the Reserve Bank to cut the Official Cash Rate today to 3%, economists are divided on whether further cuts are needed.
Westpac chief economist Kelly Eckhold suggests there is a good case for the RBNZ holding fire, as it did in July.
He recognises concerns over tariffs may have dented business and consumer sentiment, but doesn’t believe it has dented economic activity.
"Uncertainty will pass, while the impact of commodity prices and interest rates will be more enduring," Eckhold said.
Noting the Reserve Bank has already cut the OCR by 225 basis points in this cycle, Eckhold believes it can afford to sit tight for a bit and wait for the effects of these cuts to flow through the economy.
"Policy lags are long and variable – that’s what we are seeing now," he said.
Mortgage rate cuts: What should I do?
Cameron Smith
Banks cut mortgage rates ahead of OCR
Cameron Smith
The mortgage rate cut merry-go-round was in full swing last week as the five major banks lowered their home loan rates in anticipation of an OCR cut.
ASB, ANZ, Westpac, BNZ and Kiwibank are all offering one-year fixed term rates at 4.79%.
BNZ, Kiwibank and Westpac share the lowest six-month fixed rate among the big banks at 5.09%.
Four of the banks are offering a fixed rate of 4.89% for two years, while Westpac has a 4.95% special.
ASB said about 90% of its customers on fixed loans are likely to be on a rate less than 6% by Christmas.
Cameron Smith
The Reserve Bank’s OCR dilemma
Cameron Smith
OCR cutting 'could have been done quicker'
Cameron Smith
Kiwibank chief economist Jarrod Kerr told Newstalk ZB this morning more rate cuts would be needed after today.
Kerr said there should be another two rate cuts of 25 basis points, taking the Official Cash Rate (OCR) down to 2.5%.
"Why we’re saying that is that we think neutral is around 3%, and a slightly stimulatory setting is what we need ... to really get us out of this recession," Kerr said.
"You need to get interest rates to a level where it actually kicks in and it stimulates ... and we’re not there."
Kerr said we were getting close to the bottom of the interest rate cycle.
"[The Reserve Bank] could have done it quicker. They paused last meeting, which I don’t think was the right decision."
The Reserve Bank will also deliver its first new set of forecasts since May.
"[Reserve Bank Governor Christian Hawkesby] played it close to his chest in May ... I think he should have been a bit more aggressive and a bit more pro-growth," Kerr said.
"I do think they've been cautious, with what's going on overseas and there is a bit of residual inflation locally that they're worried about. I just think they need to look through it.
"This time next year, we think inflation's going to be below 2%, and that gives them plenty of headroom to cut."
What can we expect from today’s OCR call
Cameron Smith
Cameron Smith
Welcome to the Herald’s live coverage of today’s Official Cash Rate decision, from 2pm.