On April 9, the Reserve Bank of New Zealand (RBNZ) made a widely anticipated move by cutting its official cash rate by 25 basis points, bringing it down to 3.50%. This decision was in line with the guidance provided in February and met the expectations of economists at Standard Chartered, Bader Al Sarraf and Nicholas Chia.
The RBNZ’s Monetary Policy Review statement maintained a cautious tone. The bank acknowledged the recent increase in global trade barriers, identifying them as a clear threat to both the global and domestic economies. However, the RBNZ didn’t commit to a specific future rate – cut schedule. Instead, it left the door open for further easing “as appropriate,” indicating a preference for a measured approach to monetary policy adjustments.
Deliberate Pace Amid Policy Uncertainties
The RBNZ emphasized that the effects of its previous rounds of rate cuts were still working their way through the economy. This provided the bank with a reason to proceed with caution. Notably, there was no change in the RBNZ’s stance on the exchange rate. Even after the New Zealand dollar (NZD) depreciated to its lowest level since March 2020 just before the rate – cut decision, the RBNZ showed no immediate concern about the currency’s value.
Following the rate – cut announcement, the NZD – USD initially rose by approximately 25 pips, as the market had priced in the rate cut and there were no more dovish surprises. However, broader market factors, such as risk sentiment and trade – related uncertainties, quickly regained control, causing the NZD – USD to give up its gains.
Expectations for a Follow – Up Rate Cut in May
Standard Chartered’s economists expect the RBNZ to implement another 25 – basis – point rate cut in May. Although global trade tensions pose a risk to the New Zealand economy, the RBNZ will likely wait to see how these external factors impact domestic economic data. While a more aggressive rate cut is possible if the external situation deteriorates rapidly, the RBNZ is currently more inclined to take a steady approach to monetary policy easing. This measured strategy aims to balance the need for economic stimulus with the potential risks associated with over – aggressive rate cuts.
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NZD/USD Remains Under Pressure Amid Tariff Uncertainty and RBNZ Rate Cut Expectations
RBNZ Embraces Weaker Kiwi Dollar as Catalyst for Economic Recovery
