RBNZ cuts rates by 50bp, Fed officials signal diverging views

The Reserve Bank of New Zealand (RBNZ) slashed its Official Cash Rate by 50 basis points, citing softening economic activity, while Federal Reserve officials offered mixed signals on inflation and employment outlook.

By Ahmed Azzam | @3zzamous | 9 October 2024

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  • RBNZ cuts rates by 50bps to 4.75% due to weak economic conditions

  • Jefferson signals diminishing inflation risks

  • Bostic remains focused on inflation control

The Reserve Bank of New Zealand (RBNZ) lowered its Official Cash Rate by 50 basis points to 4.75%, in line with expectations, citing subdued economic activity. The central bank stated that the move is “appropriate” to maintain low, stable inflation without causing unnecessary instability in output, employment, or interest rates.

RBNZ acknowledged that despite the rate cut, the 4.75% OCR remains “restrictive,” providing flexibility to respond to unexpected economic changes. Business investment and consumer spending in New Zealand are weakening, while employment conditions are softening amid low productivity growth.

In the U.S., Federal Reserve Vice Chair Philip Jefferson noted a shift in risks between inflation and employment, signaling a more balanced outlook. He emphasized that inflationary pressures have eased while employment risks have increased, as unemployment edges up to 4.1%. Meanwhile, Atlanta Fed President Raphael Bostic remains “laser-focused” on inflation, expressing concern that it is still “too high” despite a robust labor market.

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