The Reserve Bank of New Zealand is widely expected to keep its benchmark interest rate unchanged at 3.25% during its upcoming policy meeting, following a series of six consecutive rate cuts. Since mid-2024, the central bank has aggressively lowered rates by a total of 225 basis points in an effort to stabilize economic conditions and bring inflation back within target.
While headline inflation has recently cooled to 2.5%, underlying price pressures, particularly in the services and housing sectors, continue to concern policymakers. These domestic cost drivers suggest that inflationary risks have not yet fully disappeared, prompting the bank to consider a more cautious stance.
In its last meeting, the RBNZ hinted that it may soon pause the easing cycle, noting that the impact of previous rate reductions still needs time to filter through the economy. With key data on inflation and employment due in the coming weeks, officials are likely to hold rates steady for now while monitoring further developments.
Analysts across major financial institutions agree that the July meeting is likely to result in no change to the current policy rate. However, there remains the possibility of one more cut later in the year—depending on how the economy performs through the second half of 2025.
Impact on Currency Markets
Traders will be closely watching the tone of the central bank’s statement. If the RBNZ signals confidence that current rates are sufficient, the New Zealand dollar may find support. On the other hand, if the bank maintains a dovish tone or hints at additional rate cuts, the currency could come under pressure.
Key Takeaways:
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Interest Rate: Likely to remain at 3.25%
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Inflation: Eased but domestic costs still high
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Outlook: No immediate action expected, but one more cut possible this year
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Currency Reaction: Dependent on central bank tone
The July decision marks a critical moment for New Zealand’s monetary policy path, as the central bank seeks to strike a balance between supporting growth and maintaining price stability.
