Published: 2025-10-08T05:01:05.000Z

RBNZ Review: More Dovish Surprise

21

RBNZ cut its cash rate by 50bp to 2.5% 

Forward guidance dovish pointing towards more potential cut

 

The RBNZ cut its cash rate by 50bp to 2.5% in the October meeting with no official revision to the OCR forecast since August. Different from the August cut, the 50bps cut in October is a consensus cut, which means all members agree that short term CPI may be volatile but the long time economic condition needs more accommodation. In the forward guidance, the RBNZ is consistent with their August forecast which points towards at least one more cut in the November meeting.

Some key takeaways:

Spare Capacity: The RBNZ highlight "spare capacity" in their statement. The priority of such "spare capacity" has even exceeded inflation. The RBNZ sees prolong spare capacity in New Zealand and weighed being accommodative to stimulate the economy to be more important than containing any short term spike in CPI. 

Short term Inflation Expectation: It is forecasted Q3 CPI will be at 3% y/y but should be converging towards the mid point of target range in 2026. They also see global inflationary pressure to ease further in 2026.

Slowing Outlook: The RBNZ believe the global economic outlook will slow in 2026 after the AI boom in 2025. Thus, balancing the upside and downside risk with the broader picture, the RBNZ thinks that lower interest rate will be more beneficial to New Zealand and will be cutting further.

 

4Cast Ltd. and all of its affiliates (Continuum Economics) do not conduct “investment research” as defined in the FCA Conduct of Business Sourcebook (COBS) section 12 nor do they provide “advice about securities” as defined in the Regulation of Investment Advisors by the U.S. SEC. Continuum Economics is not regulated by the SEC or by the FCA or by any other regulatory body. This research report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Nonetheless, Continuum Economics has an internal policy that prohibits “front-running” and that is designed to minimize the risk of receiving or misusing confidential or potentially material non-public information. The views and conclusions expressed here may be changed without notice. Continuum Economics, its partners and employees make no representation about the completeness or accuracy of the data, calculations, information or opinions contained in this report. This report may not be copied, redistributed or reproduced in part or whole without Continuum Economics’s express permission. Information contained in this report or relied upon in its construction may previously have been disclosed under a consulting agreement with one or more clients. The prices of securities referred to in the report may rise or fall and past performance and forecasts should not be treated as a reliable indicator of future performance or results. This report is not directed to you if Continuum Economics is barred from doing so in your jurisdiction. Nor is it an offer or solicitation to buy or sell securities or to enter into any investment transaction or use any investment service.
Analyst Declaration
I,Cephas Kin Long Yung, the FX Analyst declare that the views expressed herein are mine and are clear, fair and not misleading at the time of publication. They have not been influenced by any relationship, either a personal relationship of mine or a relationship of the firm, to any entity described or referred to herein nor to any client of Continuum Economics nor has any inducement been received in relation to those views. I further declare that in the preparation and publication of this report I have at all times followed all relevant Continuum Economics compliance protocols including those reasonably seeking to prevent the receipt or misuse of material non-public information.