As expected, the Reserve Bank of New Zealand (RBNZ) cut its Official Cash Rate (OCR) by 25 basis points to 3%. This move pressured NZDUSD; the pair falls almost -1.2% today. The monetary authorities also released an updated rate path, indicating that the OCR could fall to 2.5% by March 2026. This suggests that in the current easing cycle, the market should anticipate two more 25 bp cuts.
- The decision was not unanimous. The Monetary Policy Committee voted 4–2 in favor of a 25 bp cut, with the minority advocating for a more aggressive 50 bp reduction.
- The market reaction was swift. The New Zealand dollar weakened sharply following the RBNZ’s move, while Wellington’s stock market rebounded strongly, with the benchmark index climbing more than 1.5%.
- The decision comes against the backdrop of inflation data. On an annual basis through the end of Q2, CPI stood at 2.7%. The RBNZ projects that inflation will temporarily rise to 3% in Q3 before easing back toward 2% within a year.
- The rate cut received government approval. Finance Minister Nicola Willis emphasized that lower financing costs support business expansion, boost activity in the construction sector, create jobs, and increase household incomes.
According to RBNZ 'Further data on the speed of New Zealand's economic recovery will influence the future path of the OCR. If medium-term inflation pressures continue to ease as expected, there is scope to lower the OCR further.'
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The Kiwi remains under pressure today, with the NZDUSD pair dropping to its lowest level since early April at 0.582. In recent days, it has slipped below the 200-day exponential moving average (EMA200, red line).
Source: xStation5
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