Hawkish vs. Dovish RBNZ Rate Cut – Will NZD/USD Break Above 0.60 or Tumble Lower?
As the Reserve Bank of New Zealand heads into the May meeting, markets prepare for a widely expected rate cut, with USD to NZD rate...
Quick overview
- The Reserve Bank of New Zealand is expected to announce a 25 basis point rate cut at its May meeting, bringing the Official Cash Rate down to 3.25%.
- The New Zealand dollar (NZD/USD) is struggling to break above the $0.60 mark, reflecting market caution amid macroeconomic uncertainty.
- Consensus among major banks suggests further easing may occur throughout 2025, depending on inflation impacts from tariffs and global developments.
- The RBNZ's future policy decisions will likely be data-driven, emphasizing the need for flexibility in response to evolving economic conditions.
Live NZD/USD Chart
As the Reserve Bank of New Zealand heads into the May meeting, markets prepare for a widely expected rate cut, with USD to NZD rate struggling to break through key technical levels.
RBNZ Signals Dovish Turn as NZD/USD Trades Near 200-Day Average
The New Zealand dollar finds itself at a technical crossroads ahead of the Reserve Bank of New Zealand’s (RBNZ) upcoming policy decision on Wednesday, May 28, 2025, with the NZD/USD pair hovering near its 200-day simple moving average at around $0.5950.
Despite a 50 basis point rate cut at the last meeting, which was initially expected to weaken the kiwi further, the currency saw a modest rebound—driven in part by expectations of a more gradual easing trajectory.
NZD/USD Chart Daily – Sitting at the 200 SMA
However, repeated failures to sustain gains above $0.60 since mid-April highlight the market’s cautious stance amid growing macroeconomic uncertainty.
All Eyes on a 25bp Cut—Market Fully Priced In
Consensus among New Zealand’s major banks—ANZ, ASB, BNZ, Kiwibank, and Westpac—points to a 25 basis point cut, which would bring the Official Cash Rate (OCR) down from 3.5% to 3.25%. According to ANZ, this move is “fully expected and priced in,” noting that deviating from this path—either by pausing or cutting more aggressively—would be a major surprise.
ANZ remarked, “If we’re wrong, then everyone’s wrong,” emphasizing the widespread consensus across market participants. Still, the recent rate guidance leaves the door open for further cuts throughout 2025, depending on evolving data and the impact of external headwinds.
Longer-Term Guidance Points Toward More Easing
According to ASB, there’s a strong possibility of three additional 25bp rate cuts, potentially lowering the OCR to 2.75%. But future decisions are expected to hinge on the medium-term inflation impact of tariffs, which remains uncertain. The RBNZ may take a more cautious tone going forward, waiting for more clarity on how global developments—especially tariff dynamics—affect domestic inflation.
Westpac echoed this view, suggesting a data-dependent easing bias, with the OCR expected to drop by about 20 basis points to 2.9% by the end of the year. The evolving trade landscape, particularly the lingering effects of the US-China tariff war, continues to weigh on economic expectations and inflation forecasts.
Monetary Flexibility Now the Key Theme
Both ASB and ANZ emphasized the importance of policy flexibility moving forward. While some banks still forecast a terminal OCR near 2.5%, they also acknowledge that the RBNZ is unlikely to commit to that level immediately. Instead, the central bank is expected to maintain optionality, relying on incoming data and global developments before signaling any major shifts.
The tariff situation, although slightly improved, is still viewed as a net negative for the New Zealand economy in the medium term. Therefore, a cautious, data-driven approach to monetary policy is likely, especially as the RBNZ seeks to balance inflation concerns with the potential drag on growth.
Conclusion: NZD/USD Holds Steady, But Direction Hinges on RBNZ Messaging
While the NZD/USD has shown some resilience in the face of past rate cuts, its trajectory remains uncertain ahead of the upcoming decision. A widely expected 25bp cut is unlikely to shock markets, but forward guidance from Governor Orr and the RBNZ’s tone will be pivotal.
If policymakers emphasize continued caution and hint at more data-dependent easing, the kiwi may find support near current levels. However, any surprise in language or action could trigger renewed volatility—especially as the pair struggles to reclaim the psychologically important $0.60 level.
The broader outlook hinges not just on domestic policy, but also on global inflation, tariff-related risks, and evolving sentiment toward risk assets in the Asia-Pacific region.
NZD/USD Live Chart
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