RBNZ: Further Rate Cuts Possible in November

■ Unemployment rises to a near nine-year high in the July–September quarter, deepening the labor market slowdown.  

■ CPI reaches the upper end of the central bank’s target range, but the RBNZ expects inflation to ease from the October–December quarter. 
 

   Statistics New Zealand released labor market data for the July–September quarter on November 5. The unemployment rate rose to 5.3%, up 0.1 percentage point from the previous quarter, marking its highest level since late 2016. Employment was flat quarter-on-quarter (with April–June data revised down to a 0.2% decline), while the labor force participation rate slipped to 70.3%, down 0.2 points. The private-sector labor cost index (excluding overtime) increased 0.5% quarter-on-quarter, suggesting a slower pace of wage growth. Overall, labor market conditions have weakened further. 
 

   At its October 8 monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) lowered its policy rate by 0.50 percentage points, following a 0.25-point cut in August—the second consecutive reduction. Faced with persistent excess capacity, subdued domestic activity, and deteriorating household and business sentiment, the RBNZ remains committed to an accommodative stance. The Consumer Price Index (CPI) rose 3.0% year-on-year in the July–September quarter, touching the upper limit of the RBNZ’s 1–3% target range. However, real GDP is expected to remain negative, following a 0.9% contraction in the April–June quarter, reinforcing the likelihood of continued monetary easing. 
 

   The Monetary Policy Statement (MPS) will be released at the year’s final policy meeting on November 26, while July–September GDP data are due on December 18. According to the RBNZ’s August MPS forecast, annual CPI growth will peak at 3.0% in the July–September quarter before moderating to 2.7% in the October–December quarter and 2.3% in early 2026—moving toward the midpoint of the target range. Since February, the RBNZ has cut rates by a total of 1.75 percentage points and is expected to continue assessing the impact of earlier measures. Short-term money markets have nearly fully priced in another 0.25-point rate cut at the upcoming meeting, bringing the policy rate to 2.25%.