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The Reserve Bank of New Zealand (RBNZ) is expected to keep the Official Cash Rate (OCR) steady at 3.25% following the conclusion of its July monetary policy meeting on Wednesday.

The decision will be announced at 02:00 GMT. This time, the announcement won’t be accompanied by the Monetary Policy Statement (MPS) and followed by acting RBNZ Governor Christian Hawkesby’s press conference.

Therefore, the language in the policy review will be closely scrutinized for fresh cues on the status of the RBNZ’s easing cycle, which could significantly impact the performance of the New Zealand Dollar (NZD).

What to expect from the RBNZ interest rate decision?       

The RBNZ’s May policy statement signaled that the bank is close to the end of its rate-cutting cycle that began in August 2024. The kiwi central bank has cut rates by a total of 225 basis points (bps) since then.

In the statement, the RBNZ said that Inflation is within the target band and the OCR is close to its neutral range between 2%-4%.

The RBNZ also noted that “the full economic effects of cuts in the OCR since August 2024 are yet to be fully realized,” adding that the economic uncertainty remains high due to US tariffs.

Furthermore, New Zealand’s Consumer Price Index (CPI) inflation and Gross Domestic Product (GDP) exceeded expectations in the first quarter (Q1).

The NZ CPI rose 2.5% YoY in Q1, accelerating from the 2.2% increase seen in Q4 2024 and a 2.3% expected growth. Meanwhile, the island nation’s GDP rose 0.8% in the March quarter from the previous three months, faster than forecasts for a 0.7% increase.

Against this backdrop, the RBNZ could prefer to stand pat, awaiting the second-quarter inflation and labor data for fresh economic assessment before the August 19 policy meeting. Industry experts are expecting the next RBNZ rate reduction in August.

How will the RBNZ interest rate decision impact the New Zealand Dollar?

The NZD/USD pair is in a corrective mode from nine-month highs of 0.6121 reached a week ago. The kiwi’s downside is sponsored by the reviving safe-haven appeal of the US Dollar (USD) amid fresh tariff war fears and lingering US fiscal concerns.

The pair could extend its retracement if the RBNZ leaves the door ajar for an additional rate cut this year while acknowledging emerging risks from overseas trade uncertainty.

Conversely, the NZD could resume its uptrend if the RBNZ explicitly signals at the end of its easing cycle amid the improving economic outlook and the broad achievement of its inflation target.

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for NZD/USD and explains:

“The Kiwi pair has found support at the critical 50-day Simple Moving Average (SMA) at 0.5988 while the 14-day Relative Strength Index (RSI) looks to reclaim the midline. Buyers need acceptance above the 21-day SMA at 0.6037 for a sustained recovery. Further up, the 0.6100 round level will be tested before buyers take on the 0.6150 psychological barrier.”

“If the 50-day SMA support gives way, a steep drop toward the 100-day SMA at 0.5876 cannot be ruled out. Additional declines will target the 200-day SMA at 0.5848,” Dhwani adds.  

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