Biggest changes in the RBNZs August policy report | investingLive
Taking a quick side-by-side view of the May (left) and August (right) monetary policy reports, we can see one of the first triggers for today’s dovish NZD reaction.
In May, the RBNZ projected two cuts for the rest of the year (including the one we had today). In other words, after today, markets had expected the bank to have one more cut left in the tank.
Today’s OCR shows the bank thinks there is scope for two more, one by year-end and one more in Q1 2026.
The reason for the dovish shift can be seen in the bank’s view of both growth and the labour market.
Even though the bank projects higher inflation compared to May, they also see a much lower growth profile, with GDP for 2026 seen at 1.1% versus 1.5%. The output gap is also projected to be lower.
For the labour market, total employment is now seen at 0.8% in 2026 versus previously seen at 1.8%. The Unemployment Rate is also projected higher for 2026 from 5.0 to 5.2.
All-in-all a more dovish view from the bank compared to what we saw in May.