New Zealand's central bank is expected to cut the benchmark interest rate by 50 basis points in an effort to support the struggling economy.

• The Reserve Bank of New Zealand reduced its interest rate by 50 basis points, marking the third consecutive decrease in its benchmark rate.
• In October, the RBNZ reduced the cash rate by 50 bps, after previously cutting it by 25 bps in August.

On Wednesday, New Zealand's central bank reduced its benchmark interest rate by 50 basis points, marking the third consecutive cut, in an effort to revive the sluggish economy.

The Reserve Bank of New Zealand's interest rate is currently 4.25%. According to Reuters, economists predicted that the bank would reduce its rate by 50 bps.

The RBNZ cut the cash rate by 50 bps in October, following a 25 bps cut in August, due to subdued economic activity in New Zealand, with output remaining below its potential.

The GDP of New Zealand has been steadily declining, with a 0.2% drop in the June 2024 quarter compared to the March 2024 quarter, marking the fourth consecutive quarter of contraction. Additionally, this decline was also observed on an annual basis.

The bank stated that New Zealand's economic activity remains sluggish and output still falls short of its full potential.

Lower inflation has given the country space to reduce interest rates and stimulate economic growth.

Inflation has remained near the midpoint of the RBNZ's medium-term target range, which has helped ease price growth pressures.

Stats NZ reported that New Zealand's annual inflation rate, which reached a 33-year high of 7.3% in the June 2022 quarter, has significantly decreased. It was 2.2% in the September 2024 quarter.

The RBNZ expects to lower the OCR further early next year if economic conditions continue to evolve as projected.

Although economic growth is predicted to rebound in 2025 due to lower interest rates encouraging investment and spending, employment growth is anticipated to remain sluggish until the middle of that year.