RBNZ to pause cutting rates

The RBNZ is expected to keep rates steady at 2.75% on 29 October and resume cutting rates on 10 December, when the bank next updates its economic outlook. The RBNZ has cut rates three times in a row and it is likely to take some time to gauge the impact of those earlier easings, particularly when average underlying inflation has broadly stabilized with one RBNZ measure picking up slightly. Given that the market is pricing in a 16% probability of a 25bp rate cut, reaction in the NZD will likely be muted if RBNZ holds.

With RBNZ, while ECB and BoJ (potentially) signaling more easing to come, the boost to global risk sentiment could drive NZD outperformance versus the EUR and JPY in the near term.