The markets fully price in an RBNZ rate cut

The Reserve Bank of New Zealand meets on Wednesday, 26th of November, 2025, with the central bank poised to cut interest rates.

Will it be a 25 or 50 point cut from the RBNZ?

The question for the markets going into this RBNZ meeting is: by how much will they cut? Currently, market pricing is fully discounting a 25 basis point cut from the central bank to 2.25% and a slim, 10% chance of a 50 basis point move to 2.00%. It follows the October RBNZ decision, in which the markets were similarly split but the central bank opted for a 25 basis point move. The mercurial central bank, which has a history of surprising the markets, could conceivably do the same at this meeting and keep policy unchanged. However, given New Zealand’s macroeconomic backdrop, the probabilities are low.

The RBNZ’s justification for the more cautious cut at its last meeting was lingering upside risks to inflation. While falling into recession at stages throughout 2025 and with the unemployment rate rising to a nine year high or 5.3%, inflation remains a bugbear for the RBNZ, floating above the central bank’s target band of 1% to 3% at 3.2%. The central bank, while only mandated to target inflation having lost its employment mandate in 2023, justified cutting rates on the basis that it forecast inflation to fall because of building spare capacity in the economy.

The guidance mirrored what the RBNZ projected in its August Monetary Policy Statement, which implied an inflation rate at 2.2% by the second quarter of 2026. However, that was predicated on an overnight cash rate forecast above the current level of the OCR and with an inflation rate currently lower than that which currently prevails. As a result, the markets will be closely watching the updated Monetary Policy Statement at this meeting, especially the forecast for inflation and outlook for the OCR. That’s especially given market pricing implying a 50% chance this could be the final rate reduction of the cutting cycle.

(Source: RBNZ)

The NZD/USD remains in a downtrend, shows signs of potential reversal

The RBNZ meeting is all but certain to be a volatility event given the split pricing in the markets. Either the central bank cuts by 25 basis points and the NZD/USD experiences upward pressure as the small chance of a 50 basis point move is priced out, or the central bank surprises and cuts by 50 basis points, putting downward pressure on the pair. The Monetary Policy Statement could also be a source of volatility, either if the central bank signals it could be done with policy easing or projects there could be more cuts to come.

From a technical standpoint, the NZD/USD is a clear downtrend, with price action carving out clear higher-highs and lower-lows. However, a bullish divergence on the daily RSI is emerging, signalling a possible reversal for the pair. Resistance appears to be around 0.5690 for the pair, a break of which could herald further upside and add momentum to a trend reversal. Meanwhile, support is around 0.5580, which if broken, could open up further downside and mark a continuation of the pair’s downtrend.

(Source: Trading View)
(Past performance is not a reliable indicator of future results)