New Zealand’s central bank cut its benchmark official cash rate by 25 basis points to 2.25% on Wednesday, its lowest level since mid-2022, but policymakers signaled an end to the easing cycle as the economy showed early signs of picking up.
The New Zealand dollar jumped as traders sharply trimmed expectations for any further rate cuts, with the central bank saying the board had debated between holding rates and delivering another cut.
“Future moves in the OCR will depend on how the outlook for medium-term inflation and the economy evolve,” the Reserve Bank of New Zealand said in its accompanying monetary policy statement - the last of the year and the final meeting under governor Christian Hawkesby before Swedish economist Anna Breman takes over in December.
The RBNZ is now forecasting the cash rate will be at 2.20% in the first quarter of 2026 and 2.65% in the fourth quarter of 2027. This is lower than had been expected in August, but the path suggests a hawkish tilt as the door to further easing has been virtually shut.
The New Zealand dollar rallied 1.0% to $0.5682, the highest in over a week, while two-year interest rate swaps rose 8 basis points to 2.6653% as the market sharply scaled back chances of a further rate cut to 22%, down from just over 50% a day earlier.
