The kiwi tumbles after the reserve bank of New Zealand cuts cash rate to 1.5%

The Reserve bank of New Zealand (RBNZ) cut the country’s official cash rate to a fresh low of 1.5%

The monetary policy committee decided to lower the cash rate to support employment and inflation “consistent with its policy remit” the bank said on Wednesday.

The RBNZ cut its benchmark interest rate by 25 basis points, with an outlook to support a cooling economy and ease global uncertainties.

While the rate cut had taken some analysts by surprise, a small majority of economists had expected the cut, as the official cash rate had remained unchanged since November 2016.

"Global economic growth has slowed since 2018, easing demand for New Zealand's goods and services," the RBNZ's monetary policy committee said in a statement

New Zealand dollar price

NZD/USD tumbled off the back of the news, falling to a six-month low of $0.6525. The Australian dollar lifted as a result and NZD/JPY fell as low as 71.88 in Tokyo following the cut.

AUD/NZD climbed 0.7%

The RBNZ said they expect inflation to return to target by 2021, and a lower official cash rate provides a balanced outlook for rates going forward.

Employment

The bank said employment is near its maximum sustainable level, and the outlook for employment growth is more passive now and they expect it to ease slightly in 2019. Due to the easing, the bank said it expects inflationary pressure is to rise only slowly.

"Given this employment and inflation outlook, a lower OCR now is most consistent with achieving our objectives and provides a more balanced outlook for interest rates," the committee said in a statement.

The cut comes after Australia’s central bank decided to keep rates on hold on Tuesday, indicating an easing in the future if the unemployment rate did not fall.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.