The Reserve Bank of New Zealand's monetary policy committee has lowered the official cash rate by 25 basis points to 3.5%, citing persistent global trade tensions and subdued domestic demand.
The decision reflects a cautious response to rising downside risks to inflation and economic activity both at home and abroad.
Annual consumer price inflation remains near the mid-point of the Committee’s 1% to 3% target band, with inflation expectations and core inflation suggesting it will stay within range over the medium term.
However, the economic outlook has been dampened by newly announced trade barriers, including heightened tariffs by the United States and retaliatory measures from major trading partners, which are expected to slow global growth.
Domestically, the economy is tracking largely in line with projections from February, with higher export prices and a weaker New Zealand dollar boosting primary sector incomes.
Yet, household spending and residential investment continue to lag, and significant spare productive capacity remains in the economy.
Recent OCR cuts have yet to be fully reflected in economic activity.
The committee noted the complex inflationary implications of global tariffs, which may drive up costs in some regions while weakening global demand.
Lower oil prices and trade diversion effects could help temper imported inflation in New Zealand.
With inflation stable and economic uncertainty elevated, the committee signalled it retains scope to adjust the OCR further if necessary, with future moves contingent on inflationary pressures over the medium term.