The Reserve Bank of New Zealand is expected to cut the official cash rate by 25 basis points to 3.50% at its upcoming meeting, continuing the monetary easing strategy it has pursued since mid-last year. This move comes at a critical time, as global markets are facing mounting volatility, particularly following the surprise imposition of U.S. tariffs—adding further pressure on monetary policymakers.
Local markets reacted promptly, with the NZX-50 index dropping 4.4% and the New Zealand dollar hitting its lowest level in months. These market movements reflect heightened uncertainty, as investors await signals from the central bank regarding the continuation—and possible expansion—of its easing cycle in the second half of the year.
Although the direct impact of the U.S. tariffs on New Zealand’s exports remains limited, concerns are growing over potential slowdowns in key trading partners’ economies, such as Australia and China. Any contraction in these economies may reduce demand for New Zealand exports, thereby threatening the country’s economic growth trajectory in the coming months.
The Reserve Bank appears fully aware of the current challenges and is taking a cautious approach to policy management. The bank is expected to proceed with the planned rate cut while maintaining a flexible tone that allows for swift action should conditions deteriorate further. Market signals suggest the official cash rate could reach 2.75% during the current easing cycle—indicating a growing consensus that the upcoming phase will require greater liquidity and flexibility to preserve financial stability and support real economic activity.
