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Investing.com - The New Zealand dollar weakened Wednesday after the Reserve Bank of New Zealand (RBNZ) delivered a larger-than-expected 50 basis point interest rate cut, maintaining its dovish stance on future monetary policy.
The central bank’s decision aligned with UBS expectations but exceeded the market consensus, prompting a decline in the NZDUSD currency pair and short-dated yields. The RBNZ explicitly stated it remains open to "further reductions" in interest rates.
In its policy statement, the RBNZ emphasized that Wednesday’s actions should help strengthen GDP growth following quarterly business survey results that indicated continued weakness in domestic trading activity. Money markets reacted swiftly to the announcement, adjusting pricing to reflect a lower terminal rate of 2.08%.
UBS maintained its forecast for an additional 25 basis point cut at the RBNZ’s December 3 meeting, projecting a terminal rate of 2.25%. The investment bank also revised its NZDUSD currency pair forecasts downward, now expecting it to reach 0.57 by end-2025 (from a previous 0.60) and 0.59 by mid-2026 (from 0.62).
Market participants will closely monitor upcoming economic indicators before the next RBNZ meeting, particularly the third-quarter Consumer Price Index data due October 20 and payroll figures scheduled for release on November 5.
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