The Reserve Bank of New Zealand unexpectedly cut interest rate by 25 basis points, what impact will this have on the global stock market

The Reserve Bank of New Zealand's (RBNZ) unexpected interest rate cut by 25 basis points to 5.25% on August 13, 2024, is likely to have a positive impact on the global stock market, particularly in the short term.

1. Easing Monetary Policy: The rate cut signals a shift towards a more accommodative monetary policy, which can boost economic activity and corporate profits, often leading to increased investor confidence and stock market rallies.
2. Lower Borrowing Costs: Companies and households may benefit from lower borrowing costs, which could lead to higher investment and consumption, respectively.
3. Inflation Expectations: The RBNZ's forward guidance suggests at least three more cuts by the middle of next year, projecting the cash rate at 4.9% in the fourth quarter of 2024 and 4.4% in the second quarter of 2025. This indicates a continued easing in monetary policy, which could further support stock market performance as it aligns with a global trend of central banks adjusting rates to mitigate economic headwinds.
4. Market Sentiment: The rate cut may improve market sentiment, as it deviates from the RBNZ's previous stance of not cutting rates until 2025. This could lead to increased investor optimism and a reevaluation of future economic prospects.
5. International Response: The rate cut could also influence other central banks' policies, as it may signal a broader shift towards easing monetary policy globally. This could lead to increased cooperation among central banks to stabilize economic growth and support stock markets.

It's important to note that while the rate cut is likely to have a positive short-term impact on the global stock market, its long-term effects will depend on the sustainability of economic growth and the effectiveness of monetary policy in achieving the RBNZ's inflation targets.