RBNZ Holds Rates Amid Global Trade Tensions, NZD Flat Versus USD

The Reserve Bank of New Zealand (RBNZ) kept the Official Cash Rate steady at 3.25%, signaling a cautious stance amid global economic uncertainties and trade tensions, particularly related to U.S. tariffs impacting New Zealand's exports. While the RBNZ's forward guidance suggests the likelihood of further easing, potentially lowering rates to around 2.85% by early 2026, the central bank remains watchful of medium-term inflation pressures and economic growth. The New Zealand Dollar (NZD) has remained relatively stable near the 0.60 level against the U.S. Dollar (USD) but faces downward pressure due to narrowing yield differentials with the U.S. and persistent global trade risks. The U.S. Federal Reserve's expectation of maintaining higher rates through 2025 contrasts with the RBNZ's easing path, contributing to a weakening outlook for NZD/USD. Additionally, signs of slowing domestic activity, such as contracting factory output and a softening services sector, reinforce expectations of further monetary easing. Market participants are also monitoring escalating U.S. tariff campaigns under President Donald Trump, which add to the complexity around trade policies and currency movements.