Earlier today, the RBNZ’s monetary policy committee voted to shave off another 25bps from its overnight cash rate, a move aligned with the broader expectations of market participants.
Albeit policymakers acknowledging the upside risks of inflation and overall downside risks on the economic development front, they reached 4-2 majority decisions to lower rates further at the 3% level and drag policy rates to their lowest level in 3 years.
Inflation edged higher in the second quarter of 2025 from 2.5% to 2.7%, yet it lies withing the central bank’s 1-3% target range. Expectations for Q3 however, see price pressures reaching 3%, forecasting rises in food costs and other tradable goods and services.
In other words, the committee favoured the scenario of lowering rates which would in theory avert the New Zealand economy from contracting further, hoping to safeguard in a sense the growth aspect of the function and defibrillate its ailing economy, betting that reignition of inflation won’t be potent or as relevant.
As a matter of fact, the central bank also lowered its end of the year OCR projection to 2.55% showcasing policymakers’ intent at lowering rates further and money markets went on to price in another two 25bps cuts, once in October and once in November.
The committee, nevertheless, remains vigilant and ready to adjust the path of interest rates accordingly in the foreseeable future, should major deviations occur in the global economic outlook, which is currently threatened and burdened by tariffs and their expected inflationary impact.
On the back of this decision the Kiwi slipped by over 1% against the greenback, due to RBNZ’s dovish outlook but also due to the dollar’s recent strength
Technical Analysis
RBNZ Chart – The Kiwi slips lower by over 1% against the dollar after RBNZ’s dovish decision
Resistance: 0.5890 (R1), 0.6000 (R2), 0.6100 (R3)
Support: 0.5770 (S1), 0.5670 (S2), 0.5590 (S3)
