ANZ Bank predicts that New Zealand will lower interest rates again to stabilize recovery.

As the economic recovery falls short of expectations, ANZ has updated its forecast for New Zealand's monetary policy. Sharon Zollner, Chief New Zealand Economist at ANZ, stated in her latest report that the Reserve Bank of New Zealand (RBNZ) might adopt a more accommodative stance in 2025 to ensure the economy stays on track.

According to ANZ's latest predictions, the New Zealand central bank will cut the interest rate by 25 basis points in both August and October this year, lowering the Official Cash Rate (OCR) to 2.5% from its current level. This outlook is more accommodative than previously expected, where the bank anticipated rate cuts in May and July, with a target rate of 3%.

Zollner noted that although the New Zealand economy is indeed recovering, the process has been uneven and lacks sustained momentum. Additionally, global trade conditions remain uncertain, combined with weak international growth prospects, which could further hinder business investment and overall risk appetite.

"The economy currently needs stronger monetary policy support to ensure the recovery stays on track," she wrote in the report.

Against this backdrop, ANZ has also adjusted its forecast for New Zealand's annual economic growth. The GDP growth rate for 2025 is expected to be 1%, down from the previous forecast of 1.3%. This adjustment highlights the ongoing pressure from external uncertainties on an export-reliant open economy like New Zealand.

Markets will closely watch the signals from upcoming RBNZ policy meetings to determine whether it will further reduce rates as expected. Meanwhile, investors and businesses are reassessing the potential impact of the macroeconomic environment on financing costs, consumer confidence, and the labor market.

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