New Zealand interest rate cut: RBNZ Poised for Another Rate Cut

New Zealand interest rate cut: RBNZ Poised for Another Rate Cut

Annual Inflation in New Zealand seats at 2.2%, somewhat around the Reserve Bank of New Zealand (RBNZ) 1-3% target range. Whereas economic activities are quite sluggish and unemployment rates ticking at 5.1%. On this note, the RBNZ is expected to cut rate today Wednesday the 19th of February by 2:00 PM New Zealand Standard Time (NZST) which corresponds to 5:00 AM GMT+4 (Dubai time) in order to stimulate economic growth.
Markets expects the RBNZ to deliver a 50bps rate cut, making it four consecutive cuts since August 2024. Economic indicators released since the November MPC meeting have highlighted ongoing weakness hence signaling a need for a more relaxed monetary policy.
Reasons Behind the New Zealand’s Interest Rate Cut Decision

The Reserve Bank of New Zealand (RBNZ) is expected to cut interest rates today by 50 bps in response to growing economic concerns and rising unemployment. With the economy remaining relatively sluggish, these rates cut aims to stimulate economic activity by making borrowing more affordable. Hence making borrowing cheaper, businesses and household would have access to loans and mortgages at cheaper rate. This would encourage expansion and increased consumer spending. In view of this, New Zealand stock would likely witness a surge, as investors would likely drift from bonds to equities as lower rates causes bonds to be less attractive.
            A recent poll reveals a cautious optimistic outlook for the New Zealand economy. Where growth is expected to rise by 1.2% in 2025, with a stronger rebound expected in 2026, hitting 2.6%. Inflation on the other hand is expected to stay in check, averaging 2.1% this year and easing slightly to 2.0% in 2026
Potential Impact of Rate Cut Decision on The Kiwi: Technical Overview

In view of the rate decision by the RBNZ’s MPC, the kiwi was seen bearish on Tuesday, given up gains in previous session.
The pair created eight weeks high of 0.5750 on Monday the 17th, price is seen halted in between 0.5750 as resistance and 0.5694 as support.

Conventionally, an interest rate cut is expected to weaken the local currency and in view of today’s reading, analyst envisage further decline of NZDUSD with a potential target around 0.5694 which is in confluence with the 38.2 level of the Fib, and then 0.5661. Further decline would target 0.5600. Whereas there is still enough room to the downside as depicted by the RSI.
Meanwhile, in the case of a bullish scenario, analyst expects prices to surge with potential target at 0.5743, 0.5774 and 0.5808.
further break out of these levels are not ruled out.

Fig 1. NZDUSD 2h, Trading view