OCR cut ‘a sign we’ve got inflation under control’, says Finance Minister

Wednesday, 9 October 2024

Finance Minister Nicola Willis says the Reserve Bank’s official cash rate cut to 4.75% is “a sign we've got inflation coming under control”.

The cut was needed “to get a lid on the cost of living crisis,” Willis said.

Willis was speaking from Christchurch, where she is meeting and speaking to members of the business community.

“This is good news for the economy, it will help boost confidence.”

Willis said she thought it would have a “very quick impact on New Zealand mortgage holders”.

Half of borrowing was fixed or floating for six months or less, which means mortgage holders would be able to quickly move onto a lower rate.

“A lot of people will have the opportunity to switch to a lower interest rate, freeing up more cash for many. Cash will flow into tills of businesses.”

The official cash rate dropped to 5.25% in August, from 5.5% in June.

The Reserve Bank on Wednesday said the Committee agreed it was “appropriate to cut the OCR by 50 basis points to achieve and maintain low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates, and the exchange rate”.

“The New Zealand economy is now in a position of excess capacity, encouraging price- and wage-setting to adjust to a low-inflation economy. Lower import prices have assisted the disinflation.”

ACT leader David Seymour welcomed the cut, but said, “on the Reserve Bank’s part, a 50 basis-point cut is a multi-billion dollar mea culpa, and the latest twist of a nauseating three-year fiscal and monetary roller coaster”.

Borrowers’ hopes were high that the Reserve Bank would cut the official cash rate by 50 basis points to 4.75% at 2pm today, despite banks warning there was a chance of disappointment.

All the major banks were forecasting the Reserve Bank would announce a 50bp cut both today and at its subsequent meeting on November 27.