RBNZ to cut rates by 25bps, economists say more cuts possible after U.S. tariffs

By Lucy Craymer

WELLINGTON (Reuters) - New Zealand’s cardinal slope is expected to chopped its authoritative currency complaint by 25 ground points to 3.50% connected Wednesday and economists accidental the slope could marque much cuts successful 2025 arsenic it reacts to U.S. tariffs and their imaginable planetary economical fallout.

All 31 economists successful a Reuters canvass expected the Reserve Bank of New Zealand to chopped the currency complaint by 25 ground points to 3.50% astatine its Wednesday meeting. The cardinal slope has already chopped by 175 ground points since August past year.

In February the slope outlined plans to chopped the currency complaint by 25 ground points successful April and May if economical conditions evolved arsenic they expected.

But past week, U.S. President Trump announced sweeping tariffs that person shocked markets, threatening a commercialized warfare and feeding expectations of a planetary recession. The U.S., which is New Zealand’s 2nd largest export market, deed the state with a 10% tariff. The Pacific Nation has said it volition not retaliate.

Markets are present expecting the authoritative currency complaint to bottommost retired astatine 2.75%, compared to 3% successful the mediate of past week.

Bank of New Zealand Head of Research Stephen Toplis said successful a enactment connected Tuesday that the champion happening that New Zealand’s cardinal slope could bash was “keep a dependable manus connected the tiller,” which meant pursuing done with the 25 ground constituent chopped it had suggested successful February.

Toplis added, however, that cardinal slope messaging was apt to alteration fixed caller events. The RBNZ's is the archetypal cardinal slope to clasp a scheduled gathering since Trump announced the tariffs.

“Surely the Bank indispensable admit what is going connected present and the uncertainty this brings. In truthful doing, we would not beryllium amazed if its musings astir wherever to adjacent were near wide open,” Toplis said.

New Zealand markets, on with planetary bourses, person slumped since Trump announced the tariffs. New Zealand's NZX-50 scale is down 4.4% since Thursday, portion the New Zealand dollar has dropped 4.1% to US$0.5560.

Westpac main economist Kelly Eckhold said volatile markets needed to beryllium monitored successful lawsuit they created a sustained tightening successful fiscal conditions that fed backmost into the economical outlook.

“For the RBNZ’s part, they volition spot this arsenic a crushed to proceed to chopped the OCR (official currency rate) and clasp an easing bias,” helium said successful a note.

The nonstop interaction of tariffs connected New Zealand exports is expected to beryllium limited. However, the RBNZ noted successful its February Monetary Policy Statement (MPS) that tariffs would astir apt little maturation successful the country's main trading partners including Australia and China, which would trim request for exports, and truthful economical maturation successful New Zealand implicit the mean term.

(Reporting by Lucy Craymer; Editing by Kate Mayberry)