New Zealand central bank prepares fifth straight rate cut amid trade tariff uncertainty

The Reserve Bank of New Zealand (RBNZ) plans to cut the official cash rate (OCR) by 25 basis points (bps) at its monetary policy meeting on Wednesday, taking the key policy rate from 3.75% to 3.50%. The decision has been fully priced into the market and will be announced at 02:00 GMT.

Therefore, the wording in the RBNZ policy statement will be closely watched for new insights into future rate cuts, which could significantly influence the performance of the New Zealand Dollar (NZD).

What to expect from the RBNZ interest rate decision

The RBNZ has cut interest rates by 175 basis points since August last year, with former governor Adrian Orr leaving room for cuts in April and May at his post-February policy meeting press conference.

At its February meeting, the central bank said there were "risks of increasing trade barriers and broader geo-economic fragmentation," adding that "increased trade restrictions could reduce economic activity in New Zealand."

Earlier this month, US President Donald Trump announced his long-awaited reciprocal tariffs, with China facing an additional 34% tariff and New Zealand facing a 10% tariff. Pacific nations said they would not retaliate. China is New Zealand's largest export market, ahead of the United States.

While the direct impact of U.S. tariffs on New Zealand's economy is likely to be limited, the tariffs could reduce growth in New Zealand's major trading partners, including Australia and China, ultimately creating headwinds for the South Pacific island nation.

Clouds over the global growth outlook are likely to prompt the central bank to maintain its accommodative bias, with markets now expecting the OCR to bottom out at 2.75%, compared with 3% a week ago.