The Reserve Bank of New Zealand's Monetary Policy Committee cut the Official Cash Rate (OCR) by 25 basis points to 3.00% on 20 August 2025, alongside the release of its August Monetary Policy Statement.
The committee voted four to two for the 25 basis point reduction, with the two dissenting members preferring a 50 basis point cut. The decision took the OCR to a three-year low.
The cut resumed the easing cycle after the RBNZ held the OCR at 3.25% on 9 July 2025. That July decision was the first meeting since July 2024 at which the rate was not reduced, ending a run of six consecutive cuts.
RECOVERY STALLS
The committee said the economic recovery had stalled, with spending by households and businesses constrained by heightened global policy uncertainty, falling employment, higher prices for some essentials and declining house prices.
Annual consumer price inflation was expected to reach 3%, the top of the RBNZ's 1–3% target band, in the September quarter, before returning to around 2% by the middle of 2026.
SCOPE FOR FURTHER CUTS
The RBNZ said that if medium-term inflation pressures continued to ease as expected, there was scope to lower the OCR further. Its projections pointed to the rate falling to around 2.5% by the end of 2025. Members who favoured the larger cut pointed to weakness in the labour market, while those who backed the 25 basis point move said smaller steps would give the committee more flexibility to respond to incoming data. Trade tariffs and wider economic uncertainty remained key risks to the outlook.