New Zealand government bonds gained ground after the Reserve Bank of New Zealand delivered a 50bp cut in the official cash rate to 4.75% on Wednesday, a move forecast by 17 of the 28 analysts participating in a Reuters poll.
This is double the 25bp cut on August 14, the first reduction since March 2020, which marked the beginning of a new easing cycle.
The Bank's monetary policy committee believes annual consumer price inflation fell back within its 1%–3% target range in Q3 and expects it to remain around the 2% midpoint in the medium-term.
The Q3 CPI report will be released on October 15.
"Economic activity in New Zealand is subdued, in part due to restrictive monetary policy. Business investment and consumer spending have been weak, and employment conditions continue to soften. Low productivity growth is also constraining activity," according to the dovish accompanying statement.
"The economy is now in a position of excess capacity, encouraging price and wage setting to adjust to a low inflation economy. Lower import prices have assisted the disinflation."