The Reserve Bank of New Zealand cut rates by 25bp to 3.25% as widely expected this morning, although the overall message was more hawkish than expected, ING's FX analyst Francesco Pesole notes.
NZD/USD to move back above 0.600 in the coming weeks
"First, the vote split, 5-1 in favour of a cut, while baseline market expectations were likely a unanimous decision. Second, rate projections showed an average 2.9% level by year-end, which is below the 3.1% from February’s update but not fully signalling rates will be trimmed to 2.75%. Finally, Chief Economist Paul Conway said rates are now close to neutral, and Governor Christian Hawkesby also sounded quite cautious on future rate cuts saying 'we have done a lot of work'."
"The key takeaway is that the RBNZ is no longer committing to a set easing path, with any further moves now likely to be driven by incoming data. While another 25bp cut to 3.0% this summer remains likely, we expect the RBNZ to move in August rather than July. We had already questioned whether rates would go below 3.0% this year, given the lack of inflation progress, and today’s hawkish tone reinforces our view that only one more cut is likely in 2025."
"The RBNZ’s move away from the dovish stance seen since July 2024 is a clear positive for the NZD. We have been constructive on NZD/USD and continue to expect the pair to move back above 0.600 in the coming weeks."
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