On Wednesday, New Zealand’s central bank aggressively cut its benchmark policy rate to a fresh all-time low, prompting the local currency to fall sharply, as the country faces sluggish growth conditions due to simmering trade tensions and a global economic slowdown.
According to Reuters, the Reserve Bank of New Zealand (RBNZ) has cut the official cash rate (OCR) by a bigger-than-expected 50 basis points to 1.00%, as it looks to prop-up a cooling economy in the face of intensifying global pressure. RBNZ’s monetary policy committee told the news agency, “The Monetary Policy Committee agreed that a lower OCR is necessary to continue to meet its employment and inflation objectives.”
The New Zealand dollar sold off following the announcement, plunging as much as 2.1 per cent against the US dollar, or its lowest level since January 2016. The central bank lowered its cash rate by 25 basis points (bps) in May, and economists polled by Reuters had predicted policymakers would cut rates again this week by 25 bps. The New Zealand dollar tumbled 1% to $0.6443, a 10-month low.