The Reserve Bank of New Zealand cut interest rates as expected, but conveyed an optimistic economic outlook, causing the New Zealand dollar to surge to a near three-week high against the US dollar.
2025-11-26 11:00:07
On Wednesday (November 26) during Asian trading hours, the New Zealand dollar climbed significantly against the US dollar to around 0.5685, a near three-week high, up about 1.17%, on track for its biggest gain since June 2. The New Zealand dollar strengthened against the US dollar after the Reserve Bank of New Zealand announced its interest rate decision.
As widely expected, the Reserve Bank of New Zealand (RBNZ) decided at its November meeting on Wednesday to cut the official cash rate by 25 basis points to 2.25%. The New Zealand dollar immediately attracted some buying interest following the rate decision. This rate cut comes at a time of emerging signs of slowing economic growth, including a weak housing market.
Weaker-than-expected U.S. economic data released on Tuesday put pressure on the dollar. Data from the U.S. Census Bureau showed that retail sales rose only 0.2% month-on-month in September, lower than the previous month's 0.6% and also below market expectations of 0.4%.
Meanwhile, data released Tuesday by Automatic Data Processing (ADP) showed that U.S. private companies cut an average of 13,500 jobs in the four weeks ending November 8. This data further indicates a weakening U.S. labor market, strengthening market expectations that the Federal Reserve will cut interest rates in December and dragging the dollar lower.
According to the CME FedWatch tool, traders are now pricing in a 25-basis-point rate cut by the Federal Reserve in December, which has risen to nearly 85%, up from 80% at the beginning of the week.
U.S. durable goods orders, weekly initial jobless claims, the Chicago PMI, and the Federal Reserve's Beige Book will be released later on Wednesday. If these data are better than expected, they could boost the dollar and put downward pressure on the New Zealand dollar against the U.S. dollar.
(NZD/USD daily chart, source: FX678)
The Reserve Bank of New Zealand cut interest rates for the third consecutive time, and the market widely expects this to be the last action of the current cycle.
According to the Reserve Bank of New Zealand's forward path forecast:
The official cash rate is expected to remain at 2.25% until March 2026 (previously predicted to be 2.55%).
The official cash rate is expected to remain at 2.28% until December 2026 (previously forecast at 2.62%).
Key points of the policy statement:
The annual consumer price inflation rate rose to 3% in the September quarter.
Future adjustments to the official cash rate will depend on the evolution of the medium-term inflation outlook.
Due to the impact of idle capacity in the economy, inflation is expected to fall to around 2% by mid-2026.
Overall, the risks to the inflation outlook are balanced.
Economic activity will be weak but gradually recovering by mid-2025.
The low-interest-rate environment is stimulating household spending, and the labor market is stabilizing.
The Reserve Bank of New Zealand's latest meeting minutes show that policymakers continue to focus on the evolution of medium-term inflation and overall economic momentum, emphasizing that future interest rate decisions will depend on the development of these key factors.
The Monetary Policy Committee discussed two options at this meeting: maintaining the interest rate at 2.50% or cutting it to 2.25%. Some members believed that the rate cut was already quite significant, while others emphasized that further rate cuts could boost consumer and business confidence and prevent the risk of a slower-than-expected economic recovery.
Those who support interest rate cuts argue that there is significant and persistent excess capacity in the economy, making further easing policies justified.
Ultimately, the committee voted 5-1 to cut interest rates by 25 basis points to 2.25%, emphasizing that monetary policy still needs to operate aggressively to stabilize demand and ensure that the inflation outlook is on track to the target.
Reserve Bank of New Zealand Governor Orr subsequently stated:
This has been a challenging year for the economy.
The current cash rate is both supportive and stimulating.
We are now seeing all high-frequency economic indicators rebounding.
We are seeing signs that the labor market is stabilizing.
Interest rates are still more likely to fall than rise; the outlook is balanced.
The Reserve Bank of New Zealand forecasts that the cash rate will remain unchanged until 2026. We are in an excellent position to reduce risks and believe that risks have been balanced. The voting results will not be announced today.
In summary, the Reserve Bank of New Zealand downplayed its dovish forward guidance, adopting a more optimistic outlook for the economy. Coupled with the US dollar index falling to a more than one-week low, the New Zealand dollar gained strong upward momentum against the US dollar, previously reaching a high of 0.5691, its highest level since November 5th. New Zealand's third-quarter retail sales data will be released on Thursday; the previous figures showed a 0.5% quarter-on-quarter increase and a 2.3% year-on-year increase, which investors should pay attention to.
At 10:57 Beijing time, the New Zealand dollar was trading at 0.5681/82 against the US dollar.
As widely expected, the Reserve Bank of New Zealand (RBNZ) decided at its November meeting on Wednesday to cut the official cash rate by 25 basis points to 2.25%. The New Zealand dollar immediately attracted some buying interest following the rate decision. This rate cut comes at a time of emerging signs of slowing economic growth, including a weak housing market.
Weaker-than-expected U.S. economic data released on Tuesday put pressure on the dollar. Data from the U.S. Census Bureau showed that retail sales rose only 0.2% month-on-month in September, lower than the previous month's 0.6% and also below market expectations of 0.4%.
Meanwhile, data released Tuesday by Automatic Data Processing (ADP) showed that U.S. private companies cut an average of 13,500 jobs in the four weeks ending November 8. This data further indicates a weakening U.S. labor market, strengthening market expectations that the Federal Reserve will cut interest rates in December and dragging the dollar lower.
According to the CME FedWatch tool, traders are now pricing in a 25-basis-point rate cut by the Federal Reserve in December, which has risen to nearly 85%, up from 80% at the beginning of the week.
U.S. durable goods orders, weekly initial jobless claims, the Chicago PMI, and the Federal Reserve's Beige Book will be released later on Wednesday. If these data are better than expected, they could boost the dollar and put downward pressure on the New Zealand dollar against the U.S. dollar.
(NZD/USD daily chart, source: FX678)
The Reserve Bank of New Zealand cut interest rates by 25 basis points as expected.
The Reserve Bank of New Zealand cut interest rates for the third consecutive time, and the market widely expects this to be the last action of the current cycle.
According to the Reserve Bank of New Zealand's forward path forecast:
The official cash rate is expected to remain at 2.25% until March 2026 (previously predicted to be 2.55%).
The official cash rate is expected to remain at 2.28% until December 2026 (previously forecast at 2.62%).
Key points of the policy statement:
The annual consumer price inflation rate rose to 3% in the September quarter.
Future adjustments to the official cash rate will depend on the evolution of the medium-term inflation outlook.
Due to the impact of idle capacity in the economy, inflation is expected to fall to around 2% by mid-2026.
Overall, the risks to the inflation outlook are balanced.
Economic activity will be weak but gradually recovering by mid-2025.
The low-interest-rate environment is stimulating household spending, and the labor market is stabilizing.
The Reserve Bank of New Zealand's latest meeting minutes show that policymakers continue to focus on the evolution of medium-term inflation and overall economic momentum, emphasizing that future interest rate decisions will depend on the development of these key factors.
The Monetary Policy Committee discussed two options at this meeting: maintaining the interest rate at 2.50% or cutting it to 2.25%. Some members believed that the rate cut was already quite significant, while others emphasized that further rate cuts could boost consumer and business confidence and prevent the risk of a slower-than-expected economic recovery.
Those who support interest rate cuts argue that there is significant and persistent excess capacity in the economy, making further easing policies justified.
Ultimately, the committee voted 5-1 to cut interest rates by 25 basis points to 2.25%, emphasizing that monetary policy still needs to operate aggressively to stabilize demand and ensure that the inflation outlook is on track to the target.
Reserve Bank of New Zealand Governor Orr subsequently stated:
This has been a challenging year for the economy.
The current cash rate is both supportive and stimulating.
We are now seeing all high-frequency economic indicators rebounding.
We are seeing signs that the labor market is stabilizing.
Interest rates are still more likely to fall than rise; the outlook is balanced.
The Reserve Bank of New Zealand forecasts that the cash rate will remain unchanged until 2026. We are in an excellent position to reduce risks and believe that risks have been balanced. The voting results will not be announced today.
In summary, the Reserve Bank of New Zealand downplayed its dovish forward guidance, adopting a more optimistic outlook for the economy. Coupled with the US dollar index falling to a more than one-week low, the New Zealand dollar gained strong upward momentum against the US dollar, previously reaching a high of 0.5691, its highest level since November 5th. New Zealand's third-quarter retail sales data will be released on Thursday; the previous figures showed a 0.5% quarter-on-quarter increase and a 2.3% year-on-year increase, which investors should pay attention to.
At 10:57 Beijing time, the New Zealand dollar was trading at 0.5681/82 against the US dollar.
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