RBNZ prepares for another interest rate cut in the midst of uncertainty about commercial tariffs

  • The New Zealand reservation bank is expected to reduce the interest rate at 25 basic points up to 3.5% on Wednesday.
  • In February, the RBNZ left the door open for more cuts, anticipating the negative impact of US tariffs.
  • The New Zealand dollar could experience intense volatility after RBNZ policy ads.

The New Zealand Reserve Bank (RBNZ) is on its way to making a 25 basic points cut (PBS) at the official cash rate (OCR), reducing the key policy rate from 3.75% to 3.50% after its monetary policy meeting of April on Wednesday. The decision is completely discounted and will be announced at 02:00 GMT.

Therefore, the language in the RBNZ policy declaration will be examined closely in search of new perspectives on future feat cuts, which could significantly impact the performance of the New Zealand dollar (NZD).

What to expect from the RBNZ interest rate decision?

The RBNZ has already trimmed 175 basic points since August last year, with former governor Adrian Orr leaving the door open for rates cuts in April and May during his press conference after the policy meeting in February.

At its February meeting, the Central Bank said that “there is a risk of increasing commercial barriers and greater geoeconomic fragmentation”, adding that “an increase in commercial restrictions will probably reduce economic activity in New Zealand.”

Earlier this month, the president of the United States (USA) Donald Trump announced his long -awaited reciprocal tariffs, with China affected by additional taxes of 34% while New Zealand faces 10% tariffs. The Pacific Nation said it will not retal. China leads the US as the main export market in New Zealand.

Although the direct impact of American tariffs on New Zealand’s economy is probably limited, tariffs will probably reduce growth in the main commercial partners of the country, including Australia and China, eventually acting as an obstacle to the island nation of the South Pacific.

The most grim perspective on global growth could lead the bank to maintain its relaxation bias, with markets now waiting for the OCR to touch background at 2.75%, compared to 3% a week ago.

How will the RBNZ interest rate impact on the New Zealand dollar?

The NZD/USD is recovering from a minimum of five years about 0.5500 in the prelude to the RBNZ confrontation.

The short coverage movement or the gains in the torque could gain impulse after the expected rate of 25 PBs of the RBNZ.

The Kiwi dollar could consolidate its recent recovery if the RBNZ warns about greater inflation due to tariffs, sounding cautious about the reach of future feat cuts.

However, in the middle of the escalation of the commercial war between the US and China and the risks associated with the New Zealand economy, if the RBNZ surprises with a 50 PBs cut, it is likely that the New Zealand dollar (NZD) collapses against the US dollar (USD).

“The NZD/USD pair remains exposed to down risks since the 14 -day relative force index (RSI) remains well below level 50, despite the last rebound. If the downward trend resumes, the initial support is at a minimum of five years of 0.5506, below which the minimum of March 20 of 0.5470 will be sought For buyers it is seen at the psychological level of 0.5450. “

Any attempted recovery at the time will require acceptance above the critical confluence resistance around the 0.5700 region, where the 21 -day simple mobile average (SMA) converge, the 50 -day SMA and the 100 -day SMA. Above, the maximum of April 4, 0.5803 will be tested on the road to the 200 -day SMA at 0.5894, “adds Dhwani.

Economic indicator

RBNZ interest rates

He New Zealand Reserve Bank (RBNZ) announces your decision on the interest rate after your seven policy meetings scheduled annually. If the RBNZ adopts a hard line posture and sees that inflationary pressures are increasing, it raises the official cash (OCR) rate to reduce inflation. This is positive for the New Zealand dollar (NZD) since higher interest rates attract greater capital tickets. Similarly, if it concludes that inflation is too low, it reduces the OCR, which tends to weaken the NZD.


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Next publication:
MIÉ APR 09, 2025 02:00

Frequency:
Irregular

Dear:
3.5%

Previous:
3.75%

Fountain:

Reserve Bank of New Zealand


The New Zealand Reserve Bank (RBNZ) celebrates monetary policy meetings seven times a year, announcing its decision on interest rates and economic evaluations that influenced said decision. The Central Bank offers clues about the economic perspectives and the future trajectory of monetary policy, which are of great relevance for the valuation of the New Zealand dollar (NZD). Positive economic evolution and optimistic perspectives could lead the RBNZ to harden monetary policy raising interest rates, which is usually positive for the NZD. Monetary policy ads are usually followed by the press conference of Governor Adrian Orr.

FAQS Central Banks


Central banks have a key mandate that consists in guaranteeing the stability of prices in a country or region. Economies constantly face inflation or deflation when the prices of certain goods and services fluctuate. A constant rise in the prices of the same goods means inflation, a constant decrease in the prices of the same goods means deflation. It is the Central Bank’s task to keep the demand online by adjusting its interest rate. For larger central banks, such as the US Federal Reserve (FED), the European Central Bank (ECB) or the Bank of England (BOE), the mandate is to maintain inflation about 2%.


A central bank has an important tool to raise or lower inflation: modify its reference interest rate. In precommunicated moments, the Central Bank will issue a statement with its reference interest rate and give additional reasons of why it maintains or modifies it (cut it or the SUBE). Local banks will adjust their savings and loan rates accordingly, which in turn will make it difficult or facilitate that citizens obtain profits from their savings or that companies ask for loans and invest in their businesses. When the Central Bank substantially rises interest rates, there is talk of monetary hardening. When it reduces its reference rate, it is called monetary relaxation.


A central bank is usually politically independent. The members of the Central Bank Policy Council go through a series of panels and hearings before being appointed for a position in the Policy Council. Each member of that council usually has a certain conviction on how the Central Bank should control inflation and the consequent monetary policy. Members who want a very flexible monetary policy, with low types and cheap loans, to substantially boost the economy, while comprising with inflation slightly greater than 2%, are called “pigeons.” Members who prefer higher types to reward savings and want to control inflation at all times are called “hawks” and will not rest until inflation is located at 2% or just below.


Normally, there is a president who directs each meeting, has to create a consensus between the hawks or the pigeons and has the last word when the votes must be divided to avoid a draw to 50 on whether the current policy must be adjusted. The president will pronounce speeches, which can often be followed live, in which he will communicate the current monetary position and perspectives. A central bank will try to boost its monetary policy without causing violent oscillations of the fees, the actions or their currency. All members of the Central Bank will channel their position towards the markets before a monetary policy meeting. A few days before a monetary policy meeting is held and until the new policy has been communicated, the members are prohibited from speaking publicly. It is what is called a period of silence.

Source: Fx Street

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