The Reserve Bank of New Zealand is expected to cut its official cash rate by 25 basis points to 3.50% on Wednesday, but mounting global trade war fears may push the central bank to deliver a deeper, 50 basis point cut.
Prior to the recent market selloff, all 31 economists in a Reuters poll conducted from March 31 to April 3 forecast a standard 25 bps cut. The RBNZ has already eased by 175 bps since August in a bid to revive the weak economy and curb rising unemployment.
While February’s policy meeting signaled a gradual retreat from restrictive policy, markets now anticipate up to 100 bps of further easing in 2025. The current market turmoil may accelerate that path.
Former Governor Adrian Orr said in February that New Zealand had entered a low and stable inflation environment, with Q4 inflation at 2.2%—comfortably within the RBNZ’s 1–3% target range—giving policymakers more room to cut.
The New Zealand dollar, which had gained 5.3% this year, has been hit by the global risk selloff following President Trump’s April 2 tariff announcement. Though a 25 bps cut is priced in, a more aggressive move could be interpreted as supportive for NZD, especially as NZD/USD hovers near COVID-era lows ahead of the decision.
