- The Reserve Bank of New Zealand plans to lower its key interest rate to 3% on Wednesday.
- Attention is on the RBNZ’s OCR forecast and remarks from Governor Hawksby.
- The New Zealand dollar is reacting strongly to announcements from the RBNZ.
The Reserve Bank of New Zealand (RBNZ) is anticipated to reduce its official cash rate (OCR) from 3.25% to 3% during a monetary policy meeting this Wednesday in August.
The announcement is set for 02:00 GMT, followed by a Monetary Policy Statement (MPS). RBNZ Governor Christian Hawksby is expected to hold a press conference at 03:00 GMT.
The New Zealand Dollar (NZD) is showing significant fluctuations due to central bank policy updates.
What are your expectations for the RBNZ’s interest rate decisions?
This week, the RBNZ is planned to resume its easing cycle after pausing a series of six consecutive rate cuts at its July meeting.
This anticipated move comes after the RBNZ’s July Monetary Policy Review (MPR), which indicated a desire to lower the OCR further, aiming for levels consistent with its earlier May forecast.
That MPR mentioned that future OCR paths depend on new data regarding New Zealand’s economic recovery pace, inflation sustainability, and tariff impacts. Recently, the Consumer Price Index (CPI) rose by 0.5% in the second quarter from the previous one, marking an annual increase of 2.7%, as reported by the New Zealand Statistics Agency. Both figures were somewhat below expectations.
Meanwhile, the RBNZ’s sector factor model inflation gauge decreased from 2.9% to 2.8% year-on-year in the second quarter.
The unemployment rate in New Zealand rose to 5.2% in the June 2025 quarter, slightly up from 5.1% in the previous quarter. Yet, some details in the employment report indicated a 0.1% quarter-on-quarter decline, aligning with predictions.
Even though rising inflationary pressures and a weakening job market seem to support future rate cuts, the main question now is whether central banks will signal further rate cut possibilities, especially considering future activity indicators.
Given that rate cuts are largely exhausted, the market is not anticipating major revisions in the RBNZ’s inflation and OCR forecasts from those shared in May.
Analysts at TD Securities remarked: “We don’t foresee banks actively pursuing OCRs below 3%, but we suggest a data-informed mitigation approach. We maintain a terminal rate forecast of 3%, though we recognize there’s a risk of falling short.”
How will the RBNZ’s interest rate decision affect the New Zealand Dollar?
The NZD/USD pair is attempting to rebound from recent weekly lows ahead of the RBNZ’s announcements.
If central banks indicate they are nearing the end of the rate-cutting cycle amidst a brighter economic outlook, this could boost the NZD and propel it further upward in the days to come.
On the flip side, any downward adjustments to inflation or OCR forecasts might weigh on the kiwi, pulling the pair back to monthly lows.
Dhwani Mehta, the lead analyst for the Asian Session at FXStreet, provides some insights on the technical outlook for the NZD/USD.
“From a short-term technical perspective, as long as the 14-day relative strength index (RSI) remains below the midpoint, the risks for the kiwi pair seem tilted toward the downside,” he explains.
“Buyers should look to overcome any bearish sentiment soon, particularly past the convergence of the 21-day and 100-day simple moving averages (SMA) near 0.5950. Additionally, the 0.6000 round figure could be tested beyond the 50-day SMA at 0.5988. There’s a steep decline towards the August 5th low of 0.5881, followed by 200-day SMA support at 0.5833,” adds Dhwani.
