The Reserve Bank of New Zealand cut interest rates by 25 basis points to 2.25% in a 5-1 vote, with one member favoring no change. The OCR path has now bottomed at 2.20% in the first half of 2026, above market rates, with the Reserve Bank of New Zealand signaling no further easing. Forward guidance has become more neutral and the bias has been mitigated but not eliminated, Standard Chartered economists Badr Al-Sarraf and Nicholas Shea reported.
Falcons by design
“The Reserve Bank of New Zealand (RBNZ) delivered a widely expected 25 basis point interest rate cut to 2.25%, but public messaging was more hawkish than markets had expected. The Monetary Policy Committee (MPC) voted 5-1, with one member favoring no change – a stark contrast to market expectations of opposition on the dovish side. Forward guidance was also recalibrated as the RBNZ said future interest rate moves would depend on evolving data, unlike Previous (and less ambiguous) references to “further cuts” in the cash rate, this shift alone marks the meeting as the first meaningful step away from a strong easing bias.
“The biggest surprise came from the trajectory of the Official Interest Rate (OCR), which has now fallen to 2.20% in Q2 2026 – nearly 10 basis points above market rates and 35 basis points below August forecasts. Importantly, it shows interest rates rising again by 2027, with the expected increase almost doubling versus previous forecasts. Our conclusion is that the RBNZ sees the easing cycle as nearing completion, and is increasingly focusing on policy rather than “Politics has become too lenient amid a strong recovery.”
“The reaction of the NZD – up around 1% against the USD – reflects hawkish elements in the MPS, a higher OCR bottom, the removal of explicit easing language, and the absence of any opponents to the 50bp rate. We expect more NZD short positions to be closed over the coming months, given the extreme weakness of the NZD against the G10 pairs.”
