The Reserve Bank of New Zealand (RBNZ) cut the official cash rate (OCR) by 25 bp to 2.25%, in line with expectations, likely marking the final step in the easing cycle that began in 2024.
The decision was made in an environment where CPI inflation stands at 3%, the upper end of the 1–3% target band. Forecasts project a decline toward 2% by mid-2026. New Zealand’s economy contracted by 0.9% in Q2. However, the RBNZ believes the decline was driven by temporary factors and seasonal distortions. The latest projections suggest a moderate rebound. The committee voted 5 to 1 in favor of a 25 bp cut while stressing that future decisions will depend on inflation dynamics and economic activity.
During the press conference, acting Governor Christian Hawkesby described the decision as the beginning of a return to a more “boring” monetary-policy environment. Hawkesby hopes that by 2026 the RBNZ will disappear from front-page headlines, inflation will move closer to 2%, and economic growth will normalize. He emphasized that risks to the forecasts are balanced: global inflation and political uncertainty remain challenges, but domestic inflation expectations are becoming more firmly anchored and the labor market shows signs of stabilizing. As he stated, every option remains “on the table,” but the central projection assumes no further cuts.
Markets interpreted the combination of a dovish move and balanced rhetoric as less dovish than expected, triggering a sharp strengthening of the New Zealand dollar. Following the announcement and press conference, the NZD strengthened by about 1.10% against the U.S. dollar, becoming the strongest currency in the G10 basket. The move reflects investors’ belief that the easing cycle is nearing its end and that the RBNZ is signaling macroeconomic comfort.
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