MNI RBNZ Review-August 2025: RBNZ Signals Further Easing

Download Full Report Here

EXECUTIVE SUMMARY: 

• The MPC believes that spare capacity is now greater and more persistent than expected in May. As a result, the MPC decided to cut rates 25bp to 3% and to give a distinctly dovish message with two members voting for a 50bp reduction. 
• The revised OCR path now troughs 30bp below the May assumption at 2.55%. The Q4 average is at 2.7%, which implies cuts at both the 8 October and 26 November meetings, assuming the economy develops broadly as the RBNZ expected this month.
• Headline inflation was revised higher over H2 2025 and H1 2026 and is forecast at 2.2% in Q4 2026 with it not returning to the 2% mid-point of the target band until H1 2027. It is now expected to be at the top of the band in Q3 2025. 
• RBNZ dated OIS pricing has 19bps of easing is priced for October, with a cumulative 37bps by November 2025 versus 12bps before the decision.