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    Governor Hawkesby expects the OCR to reach 2.50% by the end of the year, depending on economic recovery.

    by VT Markets
    /
    Sep 11, 2025
    The Reserve Bank of New Zealand (RBNZ) expects the Official Cash Rate (OCR) to drop to about 2.50% by the end of the year. This timing could change depending on how quickly the economy recovers. Governor Christian Hawkesby highlighted the need for trust and confidence in the RBNZ during his speech at the Financial Services Council’s annual conference. He noted that the speed of New Zealand’s economic recovery will influence the future of the country’s cash rate.

    Dovish Pivot And Rate Projections

    The central bank has signaled a shift toward a more relaxed approach, projecting a significant decrease in the Official Cash Rate by year-end. We are now looking at a target of 2.50%, down from the current rate of 4.75%. This creates a strong opportunity for trades betting on lower interest rates in the upcoming months. This prediction aligns with recent economic data that shows a slowdown. New Zealand’s GDP growth in the second quarter of 2025 was only 0.2%, just avoiding a recession. The most recent quarterly inflation rate was 0.6%, bringing the annual rate to 2.9%. With inflation back within the target range and growth stalling, conditions are right for monetary easing. In the coming weeks, focusing on fixed interest rate swaps will be a top strategy to benefit from falling short-term rates. We also see an opportunity to short the New Zealand dollar, especially against the US dollar, as the interest rate gap narrows. It’s important to keep an eye on upcoming data because any surprises in economic recovery could change the timing of these expected cuts.

    Reversal Of Tightening Measures

    This shift marks a clear reversal from the aggressive tightening measures taken in 2023 and 2024 to tackle high inflation. The “test of trust” indicates that the Reserve Bank may take strong actions to support the economy now that inflation levels are manageable. We need to stay alert for any unexpectedly strong job or economic activity data that might temporarily delay this dovish trend. Create your live VT Markets account and start trading now.

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