WELLINGTON (April 9): New Zealand's central bank cut its benchmark rate by 25 basis points (bps) to 3.50% on Wednesday, as policymakers sought to revive a struggling economy and counter risks from trade tariffs.

The decision was in line with a Reuters poll, where all 31 economists surveyed forecast the Reserve Bank of New Zealand (RBNZ) would cut the cash rate for the fifth successive meeting.

The central bank has now cut rates by 200bps since August, with slowing inflation giving policymakers leeway to lower borrowing costs, as the economy faces headwinds from potentially slower global growth due to rising trade tensions.

The Committee agreed that a 25bps reduction in the official cash rate (OCR) would be consistent with their mandate of maintaining low and stable inflation, the minutes of the meeting said.

"As the extent and effect of tariff policies become clearer, the Committee has scope to lower the OCR further as appropriate," the minutes added.

Global markets have been in turmoil since US President Donald Trump's decision last week to impose sweeping new tariffs on imports from most of the world. His announcement was met with retaliatory tariffs from many US trading partners.

The RBNZ statement added that having consumer price inflation close to the middle of its target band of 1% to 3% puts the Committee in the best position to respond to developments.

This is a monetary policy review, and the central bank is not due to release updated economic forecasts until it meets in May.

However, New Zealand's Finance Minister Nicola Willis warned on Tuesday that Treasury now expects growth from its trading partners to be at 2.0% in 2026, down from earlier forecasts of 2.5%. New Zealand, which faces a 10% tariff on exports to the US, is expected to fare relatively well, as weakness in the New Zealand dollar offsets much of the impact.

The RBNZ added that the announced increases in global trade barriers weaken the outlook for global economic activity.

"On balance, these developments create downside risks to the outlook for economic activity and inflation in New Zealand," it said.

New Zealand's economy emerged from recession in the fourth quarter of 2024, with 0.7% quarterly growth. However, employment is expected to continue to rise in the first half of this year, and sentiment remains soft. The RBNZ said in its statement that household spending and residential investment remain weak.

The RBNZ's move on Wednesday marks the first interest rate decision since Christian Hawkesby took up the role of governor, following Adrian Orr's unexpected resignation in March.

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