Governor Hawkesby speaks on interest rate outlook after the dovish RBNZ cut
Reserve Bank of New Zealand’s (RBNZ) acting Governor Christian Hawkesby presents the prepared remarks on the policy statement and responds to media questions at the press conference after the August monetary policy announcement.
Following its August policy meeting, the RBNZ delivered a 25 basis points (bps) cut to the Official Cash Rate (OCR) from 3.25% to 3%, as widely expected.
Please follow the Live Stream of the press conference here
RBNZ press conference key quotes
Next two meetings are live, no decisions have been made.
OCR projection troughs around 2.5%, consistent with further cuts.
Not changed view on neutral, OCR not restrictive anymore.
Q2 economic activity considerably weaker than expected.
Past 250 bps of easing will support growth.
Comfortable with fall in NZ$.
This section below was published at 02:00 GMT following the Reserve Bank of New Zealand (RBNZ) policy announcements.
The Reserve Bank of New Zealand (RBNZ) announced on Wednesday that it cut the Official Cash Rate (OCR) by 25 basis points (bps) to 3.00% from 3.25% following the conclusion of the August policy meeting on Wednesday.
The decision came in line with the market expectations.
Summary of the RBNZ Monetary Policy Review (MPR)
If medium-term inflation pressures continue to ease as expected, there is scope to lower the OCR further.
Spare capacity in the economy and declining domestic inflation pressure, headlineinflation is expected to return to around the 2 percent target midpoint by mid-2026.
Further data on the speed of new zealand’s economic recovery will influence the future path of the OCR
New Zealand’s economic recovery stalled in the second quarter of this year.
There are upside and downside risks to the economic outlook.
There are upside and downside risks to the economic outlook.
Cautious behaviour by households and businesses could further dampen economic growth.
Alternatively, the economic recovery could accelerate as the full effects ofinterest rate reductions flow through the economy.Alternatively, the economic recovery could accelerate as the full effects ofinterest rate reductions flow through the economy.
Minutes of the RBNZ interest rate meeting
By a majority of 4 votes to 2, the committee agreed to decrease the OCR by 25 basis points to 3 percent.
On Wednesday, 20 august, the committee voted on the options of either reducing the OCR by 25 basis points or reducing the OCR by 50 basis points
The case for lowering the OCR by 25 basis points to 3 percent was based on the upside and downside risks around the central projection being broadly balanced
If medium-term inflation pressures continue to ease in line with the committee’s central projection, the committee expects to lower the OCR further
Reducing the OCR by 25 basis points at this meeting provides the opportunity to adjust this view incrementally in response to new information.
The case for lowering the OCR by 50 basis points to 2.75 percent emphasised declining inflationary pressure and significant spare capacity.
Some members put relatively more weight on the risk that the negative consequences of global policy uncertainty on domestic consumption and investment are self-reinforcing and therefore more persistent.
With inflation projected to increase to 3.0 percent in the September quarter, there is a material possibility that it rises above the target band.
A larger reduction in the OCR might disrupt such a dynamic and generate clearer signals that support consumption and investment, whereas a gradual reduction in the ocr might not provide the same positive signalling effect.
The committee discussed three policy options: keeping the OCR on hold at 3.25 percent, cutting the OCR by 25 basis points to 3 percent, or cutting by 50 basis points to 2.75 percent.
RBNZ updated economic forecasts
“RBNZ sees Official Cash Rate at 2.59% in September 2026 (pvs 2.9%)”
“RBNZ sees Official Cash Rate at 2.71% in December 2025 (pvs 2.92%).”
“RBNZ sees annual CPI 2.2% by September 2026 (pvs 2.1%).”
“RBNZ sees TWI NZD at around 68.0% in September.”
“RBNZ sees Official Cash Rate at 2.62% in December 2026 (pvs 2.94%).”
“RBNZ sees Official Cash Rate at 2.85% in September 2028.”
NZD/USD reaction to the RBNZ interest rate decision
The New Zealand Dollar attracts some sellers in an immediate reaction to the RBNZ interest rate decision. The NZD/USD pair currently trades at 0.5843, down 0.83% on the day.
New Zealand Dollar PRICE Last 7 days
The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies last 7 days. New Zealand Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.40% | 0.25% | -0.13% | 0.78% | 1.39% | 2.21% | 0.28% | |
| EUR | -0.40% | -0.10% | -0.57% | 0.36% | 0.99% | 1.77% | -0.13% | |
| GBP | -0.25% | 0.10% | -0.42% | 0.45% | 1.09% | 1.97% | -0.00% | |
| JPY | 0.13% | 0.57% | 0.42% | 0.91% | 1.52% | 2.34% | 0.41% | |
| CAD | -0.78% | -0.36% | -0.45% | -0.91% | 0.59% | 1.45% | -0.46% | |
| AUD | -1.39% | -0.99% | -1.09% | -1.52% | -0.59% | 0.78% | -1.10% | |
| NZD | -2.21% | -1.77% | -1.97% | -2.34% | -1.45% | -0.78% | -1.84% | |
| CHF | -0.28% | 0.13% | 0.00% | -0.41% | 0.46% | 1.10% | 1.84% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).
(This story was corrected on August 20 at 02:30 GMT to say, in the title, that RBNZ reduces interest rate by 25 bps to 3.00% as expected, not vs. 3.25% expected)
This section below was published on August 20 at 21:15 GMT as a preview of the Reserve Bank of New Zealand (RBNZ) interest rate decision.
- The Reserve Bank of New Zealand is set to lower the key interest rate to 3% on Wednesday.
- The focus will be on the RBNZ’s OCR projection and Governor Hawkesby’s comments.
- The New Zealand Dollar braces for intense volatility on the RBNZ policy announcements.
The Reserve Bank of New Zealand (RBNZ) is widely expected to lower the Official Cash Rate (OCR) from 3.25% to 3% when the board members conclude the August monetary policy meeting on Wednesday.
The decision will be announced at 02:00 GMT, accompanied by the Monetary Policy Statement (MPS). RBNZ Governor Christian Hawkesby’s press conference will follow at 03:00 GMT.
The New Zealand Dollar (NZD) remains exposed to big moves in immediate reaction to the central bank’s policy announcements.
What to expect from the RBNZ interest rate decision?
The RBNZ is set to resume its easing cycle this week, after having paused a series of six consecutive interest rate cuts in the July meeting.
Such a move would come as no surprise, especially after the RBNZ July Monetary Policy Review (MPR) said, “Committee expects to lower the official cash rate further, broadly consistent with the projection outlined in May.”
Back then, the MPR noted that the future path of the official cash rate would depend on additional data regarding the pace of New Zealand’s economic recovery, the persistence of inflation, and the impacts of tariffs. Since then, the Consumer Price Index (CPI) rose 0.5% in the second quarter from the prior quarter and was up an annual 2.7%, Statistics New Zealand said. Both figures were a tad slower than the forecasts.
However, the RBNZ’s Sectoral Factor Model Inflation gauge fell from 2.9% to 2.8% YoY for the second quarter.
New Zealand’s Unemployment Rate climbed to 5.2% in the June 2025 quarter, up from 5.1% in the previous quarter, while other details of the jobs report showed a 0.1% QoQ decline in hiring as expected.
Weakening inflationary pressures and labor market conditions justify the upcoming rate cut, but the main focus will be on whether the central bank keeps the door open for further rate cuts amid signs of a pick-up in forward-looking measures of activity.
With a rate cut fully baked, markets are not expecting any big changes to the RBNZ’s inflation and OCR forecasts, compared with the May projections.
Analysts at TD Securities said: “We are not expecting the Bank to make a strong case for taking the OCR below 3% but advocate a data-dependent easing bias. We stick to a 3% terminal rate forecast but acknowledge the risks are skewed to the downside.”
How will the RBNZ interest rate decision impact the New Zealand Dollar?
The NZD/USD pair is on the road to recovery from weekly troughs in the lead-up to the RBNZ showdown.
If the central bank hints that it is nearing the end of the rate-cutting cycle amid an improving economic outlook, it could boost the NZD, providing extra legs to the recent upswing.
However, any downward revisions to the inflation and/or OCR forecasts could bode ill for the Kiwi Dollar, dragging the pair back toward the monthly lows.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for NZD/USD and explains:
“From a near-term technical perspective, risks remain skewed to the downside for the Kiwi pair so long as the 14-day Relative Strength Index (RSI) stays below the midline. Adding credence to the bearish outlook, the 21-day Simple Moving Average (SMA) is on the verge of crossing below the 100-day SMA, teasing a potential Bear Cross.”
“Buyers need acceptance above the 21-day SMA and the 100-day SMA confluence near 0.5950 to negate the bearish bias in the immediate term. Further up, the 0.6000 round level could be tested after the NZD/USD pair surpasses the 50-day SMA at 0.5988. The 0.6050 psychological barrier will be next on tap. Conversely, a sustained break below the static support near 0.5900 will pave the way for a steep drop toward the August 5 low of 0.5881, below which the key 200-day SMA support at 0.5833 will be exposed,” Dhwani adds.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.