The New Zealand Dollar plunged to a fresh seven-week low against its US counterpart on Wednesday, after the Reserve Bank of New Zealand cut its official cash rate by 50 basis points to 4.75% at its October policy meeting, in line with market consensus.
The RBNZ said in its statement that the decision aimed “to achieve and maintain low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates, and the exchange rate.”
The minutes from the RBNZ policy meeting revealed that annual inflation was expected to return within the central bank’s 1% to 3% target range in the third quarter.
Annual CPI inflation in New Zealand slowed to a 3-year low of 3.3% in the second quarter of 2024 from 4% in Q1.
“The New Zealand economy is now in a position of excess capacity, encouraging price- and wage-setting to adjust to a low-inflation economy. Lower import prices have assisted the disinflation,” the RBNZ noted.
According to ANZ chief economist Sharon Zollner, “there was nothing in today’s commentary to dissuade the market from continuing to price a follow-up 50bp cut in November as the likeliest outcome.”
The NZD/USD currency pair was last losing 0.78% on the day to trade at 0.6089.
The Forex pair went down as low as 0.6073 immediately after the policy announcement.
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