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The Reserve Bank of New Zealand (RBNZ) is expected to cut the official cash rate (OCR) to 2.25% from 2.5%, after the end of its November monetary policy meeting on Wednesday.
The decision will be announced at 01:00 GMT, accompanied by the Monetary Policy Statement (MPS) and followed by a press conference by RBNZ Governor Christian Hawkesby at 02:00 GMT. The New Zealand Dollar (NZD) is likely to see a major reaction to the central bank’s policy announcements.
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What to expect from the Reserve Bank of New Zealand’s interest rate decision?
After a record 25 basis point cut in August and a surprise 50 basis point cut in October, the Reserve Bank of New Zealand is expected to hit a hat-trick, with a 25 basis point cut fully expected for its November monetary policy meeting.
The Central Bank has decided to resort to a significant reduction in interest rates in its latest policy decision in view of the slowdown in the economy and confidence that … Inflation is under control.
In its October Monetary Policy Review (MPR), the Reserve Bank of New Zealand noted that “the Committee remains open to further cuts in the policy rate as necessary to ensure that inflation is sustainably stabilized near the intermediate target of 2% over the medium term”.
Therefore, Another reduction in interest rates Wednesday will not be surprising.
Therefore, all eyes will be on the discussions between policy makers on further easing of monetary policy as 2026 approaches.
Adjustments to the official forecasts of interest rates in the first half of next year will also be examined for the future path of the bank on interest rates.
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New Zealand inflation continues to accelerate
Since the October meeting, New Zealand’s annual consumer price index (CPI) inflation accelerated in the third quarter (Q3) to 3.0%, in line with expectations and at the top of the central bank’s target range of 1% to 3%.
However, the Reserve Bank of New Zealand made it clear in October that inflation was rising, but noted that the economy’s spare capacity should return to 2% by mid-2026, suggesting that policymakers do not expect inflation to be sustainable.
In addition, annual non-commercial inflation fell to 3.5% in the third quarter, compared to 3.7% in the second quarter.
The Reserve Bank of New Zealand’s Monetary Conditions survey on November 11 also showed that two-year inflation expectations, considering the time frame when the central bank’s actions translate into prices, was 2.28% in the fourth quarter of 2025.
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Meanwhile, New Zealand’s unemployment rate rose to 5.3% in the third quarter from 5.2% in the second quarter, according to official data published by Statistics New Zealand on November 4. The numbers were in line with market expectations.
Amid expectations that core inflation will slow significantly, another interest rate cut by the Reserve Bank of New Zealand is warranted.
“We expect a 25 basis point cut in the policy rate to 2.25%,” Westpac NZ economists say.
“We see a downward revision in the expected path of the policy rate of about 30-35 basis points, with a low point in the forecast of about 2.20% in the first half of 2026. The effect is a simple data-dependent easing trend for the coming year.”
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How will the Reserve Bank of New Zealand’s interest rate decision affect the New Zealand dollar?
NZD/USD is struggling at seven-month lows as risks of an RBNZ event. Growing expectations of a rate cut in November have weighed heavily on the New Zealand dollar since late October.
If the central bank lowers its inflation forecast or policy rate while maintaining an easy bias, the New Zealand dollar may extend the current trend.
In contrast, the New Zealand dollar could see a significant rebound if the RBNZ signals the end of the rate cut cycle on an improving economic outlook and US rate issues.
Dhwani Mehta, Chairman of the Asian Session at… FXStreetA brief technical overview of the NZD/USD currency pair is explained:
“From a short-term technical perspective, downside potential remains for the NZD pair as the 14-day RSI remains significantly vulnerable below its midline.”
“If sellers show strength on a tightening RBNZ cut, EUR/USD could fall further towards the declining trend line support at 0.5550. Falling further south, the rounded level 0.5500 and the April low of 0.5486 could be tested. On the other hand, the pair needs to cross the 21-day SMA. The above targets are aligned to the average “The 50-day SMA is at 0.5735 and at the limit of 0.5800,” adds Dhwani.
