RBNZ cut the OCR by 25bps to 2.25% as widely expected, but the tone of the announcement was more hawkish than markets had anticipated.
Policymakers revealed they had debated holding rates at 2.50% versus cutting to 2.25%, and the final decision was reached by a 5–1 vote. The lone dissenter in favour of holding highlights pockets of concern about easing too deeply and reflects a more cautious internal balance than many had assumed.
More importantly for markets, RBNZ’s updated forward guidance showed a notably firmer policy path. The Bank now expects the OCR to bottom at just 2.2% through 2026 before gradually rising to 2.7% by the end of 2027. That trajectory implies minimal scope for further cuts next year if the economic outlook holds, effectively signaling that today’s move may mark the end of the easing cycle.
The accompanying statement reinforced that message. RBNZ said economic activity was weak through mid-2025 but is now improving, with lower interest rates supporting household spending and the labor market stabilizing. The fall in the exchange rate is also lifting exporters’ incomes, reducing the need for more aggressive stimulus from here. Risks to the inflation outlook are now viewed as “balanced”.
