Newsquawk Central Banks - PREVIEW: RBNZ Rate Decision Scheduled for Wednesday 9th July 2025 at 03:00BST/22:00EDT

• RBNZ is expected to keep the OCR unchanged at 3.25%


• RBNZ delivered a 6th consecutive cut at the last meeting and signalled a pause


• Firmer-than-expected GDP data for Q1 supports the case for a pause

OVERVIEW: The RBNZ is likely to keep rates unchanged at its meeting on Wednesday with 19 out of 27 economists forecasting the central bank to keep the Official Cash Rate at 3.25%. Money markets price around an 81% probability that the OCR will be maintained at the current level and just about a 19% chance for a 25bps cut.

RBNZ CUT RATES FOR A 6TH CONSECUTIVE MEETING IN MAY AND SIGNALLED A PAUSE: The RBNZ delivered its 6th consecutive cut at the last meeting in May, which was widely expected. It noted that inflation is within the target band, core inflation is declining, and it is well placed to respond to domestic and international developments. The central bank also lowered its OCR projections for the entire forecast horizon and cut its June 2026 CPI view at the meeting, while the minutes from the meeting noted the Committee discussed the options of keeping the OCR on hold at 3.50% or reducing it to 3.25% and noted that the full economic effects of cuts in the OCR since August 2024 are yet to be fully realised. Furthermore, it was revealed that the decision was made by a majority of 5 votes to 1. Governor Hawkesby commented that the decision to hold a vote on rates was a healthy sign and not unusual at turning points, as well as stated that central projections are wide enough not to have a bias regarding what the next step is at the next meeting and the key message is that they have come a long way and are well placed to respond to developments but are not pre-programmed on moves now, which suggests the central bank will likely pause in the immediate term.

RHETORIC AND DATA SUPPORT THE CASE FOR A PAUSE: Comments from other officials also suggest a lack of urgency to continue cutting rates as Assistant Governor Silk noted that interest rates are in the 2.5%-3.5% neutral band and that the impact of past cuts is yet to flow through, while a strong export sector, are among arguments for not going below neutral. She also stated that data will decide when or if they cut further from here. As such, the key data releases since the last meeting would support the case for a pause as New Zealand GDP for Q1 topped forecasts with QQ GDP at 0.8% vs. Exp. 0.7% (Prev. 0.7%, Rev. 0.5%) and YY GDP at -0.7% vs. Exp. -0.8% (Prev. -1.1%, Rev. -1.3%).

ANNOUNCEMENT: The announcement is scheduled on Wednesday at 03:00BST/22:00EDT, while participants will also be eyeing the central bank’s rhetoric for any clues on future policy, although any hints may be limited given that the upcoming meeting is for a Monetary Policy Review and will not include a post-meeting press conference.

08 Jul 2025 - 08:41- Fixed IncomeData- Source: Newsquawk