RBNZ expected to cut interest rates to 2.75% in October
- The Reserve Bank of New Zealand is expected to deliver another 25 bps cut to the key interest rate on Wednesday.
- The Monetary Policy Review will be closely scrutinized for fresh cues on the RBNZ’s rate outlook.
- The New Zealand Dollar is set to experience a big reaction to the RBNZ monetary policy announcement.
The Reserve Bank of New Zealand (RBNZ) is widely expected to cut the Official Cash Rate (OCR) by another 25 basis points (bps) from 3% to 2.75% after concluding its October monetary policy meeting on Wednesday.
The decision will be announced at 01:00 GMT, but will not be accompanied by the Monetary Policy Statement (MPS). There will be no press conference by RBNZ Governor Christian Hawkesby following this meeting.
The New Zealand Dollar (NZD) is set for intense volatility in reaction to the central bank’s policy announcements.
What to expect from the RBNZ interest rate decision?
The RBNZ is on track to announce a second consecutive 25 bps rate cut in October. However, the swaps market is implying a 30% probability of a bigger 50 bps cut to 2.5%.
RBNZ Governor Christian Hawkesby, during the press conference following the August policy meeting, said that the “OCR projection troughs around 2.5%, consistent with further cuts.”
He further noted that the “next two meetings are live, no decisions have been made.”
Since then, New Zealand’s economic activity has significantly deteriorated. Therefore, a surprise 50 bps rate cut by the central bank this week cannot be ruled out.
However, markets believe that the RBNZ would want to wait for the inflation and employment data before opting for front-loading, as it continues to watch the incoming data.
“One of the key challenges with the RBNZ is its reliance on infrequent data releases. Markets need to wait until 19 October for the crucial third-quarter CPI report, which can steer rate expectations more than any forward guidance at next week’s meeting. Third quarter employment data won’t be available until 4 November,” ING FX Strategist said in his latest research note.
How will the RBNZ interest rate decision impact the New Zealand Dollar?
The NZD/USD pair has paused its recovery just under the 0.5850 barrier heading into the RBNZ event risk. Will the RBNZ trigger a fresh downtrend in the NZD?
That could happen if the central bank lowers borrowing rates by 50 bps or explicitly leaves the door open for a December rate cut by expressing a grim outlook on the economy or any dovish tweaks to the Monetary Policy Review (MPR).
On the other hand, the NZD could see a fresh advance if the central bank hints that it is nearing the end of the rate-cutting cycle.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for NZD/USD and explains:
“From a short-term technical perspective, the Kiwi pair remains vulnerable as the 14-day Relative Strength Index (RSI) turns lower below the midline. The pair has failed to surpass the critical 200-day Simple Moving Average (SMA) at 0.5845 on multiple occasions, suggesting that sellers continue to lurk at higher levels.”
“Buyers need acceptance above the aforesaid 200-day SMA barrier to initiate a fresh uptrend. Further up, the confluence zone of the 21-day SMA and the 50-day SMA around 0.5875 will act as a tough nut to crack on the way to 0.5900. The 100-day SMA at 0.5947 will be the last line of defense for sellers. Conversely, a sustained break below the September 26 low of 0.5754 will open the door toward the 0.5700 round level. The next downside cap is seen at the 0.5650 psychological barrier,” Dhwani adds.
Economic Indicator
RBNZ Monetary Policy Review
At each of the Reserve Bank of New Zealand (RBNZ) seven meetings, the RBNZ’s Monetary Policy Committee (MPC) publishes the Monetary Policy Review (MPR), which gives an interim update on the monetary policy outlook and settings. The review may influence the volatility of the New Zealand Dollar (NZD) and determine a short-term positive or negative trend. A hawkish view is considered bullish for NZD, whereas a dovish view is considered bearish.
Read more.Next release: Wed Oct 08, 2025 01:00
Frequency: Irregular
Consensus: -
Previous: -
Source: Reserve Bank of New Zealand
The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by interim Governor Christian Hawkesby’s press conference.
RBNZ FAQs
The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are achieving and maintaining price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the band of between 1% and 3% – and supporting maximum sustainable employment.
The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decides the appropriate level of the Official Cash Rate (OCR) according to its objectives. When inflation is above target, the bank will attempt to tame it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken NZD.
Employment is important for the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration in inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says.
In extreme situations, the Reserve Bank of New Zealand (RBNZ) can enact a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to buy assets – usually government or corporate bonds – from banks and other financial institutions with the aim to increase the domestic money supply and spur economic activity. QE usually results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the objectives of the central bank. The RBNZ used it during the Covid-19 pandemic.
Artigos Recomendados
