NZD: RBNZ to cut, rate projections in focus – ING

The Reserve Bank of New Zealand is widely expected to cut rates by another 25bp to 3.25% tonight (announcement at 04:00am CET). The Bank will also publish the new Monetary Policy Statement, which includes policy rate projections. The latest update from February had rates bottoming at 3.0% at the end of 2025. That was before 'Liberation Day', and the year-end projection might be revised below 3.0%, ING's FX analyst Francesco Pesole notes.

NZD/USD can eye 0.610 in the coming weeks

"Markets are, however, starting to have some doubts about how far rates can be trimmed. The NZD OIS pricing for the last meeting of 2025 (in November) is at 2.85%, having risen over 10bp since early May. That’s because growth risks have abated after the US-China deal, allowing more focus on a not-so-convincing inflation picture."

"Non-tradable inflation surprisingly accelerated in the first quarter, while the more forward-looking two-year inflation expectations have rebounded to 2.3% from 2.06%. Meanwhile, PMIs have been resilient, and first-quarter data showed no dip in retail sales, while unemployment failed to climb."

"We think the Kiwi dollar is in a good position. Even if the RBNZ ends up signalling it can take rates below 3.0%, the negative impact for NZD may not be long-lived. Inflation prevents markets from going too aggressive on RBNZ cuts, and recovering sentiment on China and in global equities can keep fuelling demand for the high-beta NZD. We think NZD/USD can eye 0.610 in the coming weeks."