NZD/USD Moves Above 0.57 Despite The Dovish RBNZ Rate Cut
NZD/USD bounced higher last night after the 50 bps rate cut from the Reserve Bank of New Zealand, while Gov. Orr signaled more cuts to come.
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The RBNZ has delivered a widely anticipated 50bp rate cut, signaling a shift toward further easing as inflation moderates. While the central bank remains cautious about economic recovery, the updated rate projections suggest policymakers are prepared to act further if needed. Near-term risks, such as sluggish growth and external price pressures, could influence future policy decisions. Markets will closely watch upcoming data and the central bank’s tone in future meetings.
NZD/USD Chart H4 – Trading Between 2 MAs
NZD/USD initially dropped 30 pips to 0.5677 following the Reserve Bank of New Zealand’s 50 basis point rate cut, which was in line with expectations. However, the pair found support at key moving averages on the H4 chart and rebounded above 0.57. The RBNZ hinted at further rate reductions, but the recovery in NZD/USD may have been driven by the central bank’s intent to support New Zealand’s struggling economy as it emerges from a recession.
RBNZ Cuts Rates as Inflation Cools, Signals Further Easing
Rate Decision & Inflation Outlook
- The Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) by 50 basis points to 3.75%, in line with expectations.
- Inflation is easing, with annual CPI now near the midpoint of the Monetary Policy Committee’s 1-3% target band.
- The RBNZ forecasts annual CPI at 2.2% by March 2026, slightly lower than the previous estimate of 2.3%.
Future Rate Projections
- The OCR is expected to decline further:
- 3.45% in June 2025 (previously 3.83%)
- 3.1% in March 2026 (previously 3.43%)
- 3.1% in June 2026 (previously 3.32%)
- 3.1% in March 2028
- The RBNZ sees room for further rate cuts if economic conditions warrant it.
- The OCR is expected to decline further:
Economic Conditions & Market Impact
- The central bank notes that economic activity remains subdued but expects a recovery over 2025.
- New Zealand’s Trade-Weighted Index (TWI) for the NZD is projected at 67.5% in March 2026, down from the prior estimate of 69.5%.
- Short-term inflation volatility is expected due to currency depreciation and rising fuel prices.
Governor Orr’s Comments at the Media Conference
- The economy has “significant spare capacity.”
- Further rate cuts in April and May, possibly in two 25bp steps, appear appropriate.
- Slower economic growth remains a near-term risk.
The RBNZ’s decision aligns with its ongoing easing cycle, having reduced interest rates by 175 basis points since August. Slowing inflation has given policymakers room to continue easing monetary conditions. While the 50bp cut was widely anticipated, the NZD/USD pair’s bounce suggests that traders may have already priced in the dovish outlook. Governor Orr’s comments reinforced the expectation that borrowing costs will fall further in the coming months, keeping markets attentive to the RBNZ’s next moves.
NZD/USD Live Chart
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