New Zealand dollar slides to three-week low after central bank decision

The New Zealand dollar fell broadly against a basket of major currencies in Asian trading on Wednesday, extending losses against its US counterpart for a second consecutive day and hitting a three-week low following the Reserve Bank of New Zealand’s policy meeting.

The meeting’s outcome was largely in line with market expectations, while the central bank’s comments on the outlook for interest rates appeared less hawkish than anticipated.

The Reserve Bank of New Zealand raised interest rates for a second consecutive meeting and said its gradual approach to monetary policy tightening reduces the risk of larger rate hikes being required in the future.

The Price

• New Zealand dollar today: The New Zealand dollar fell 0.9% against the US dollar to 0.5839, its lowest level since August 13, from an opening level of 0.5894, after recording a session high of 0.5898.

• The New Zealand dollar ended Tuesday down 0.4% against the US dollar, marking its second loss in three days, pressured by a sharp rise in US Treasury yields.

Reserve Bank of New Zealand

The Reserve Bank of New Zealand (RBNZ) raised its benchmark interest rate by 25 basis points on Wednesday to 2.75%, its highest level since August 2025, broadly in line with market expectations and marking a second consecutive rate hike.

RBNZ raises interest rate to one-year high

The decision was unanimously approved by all six members of the Reserve Bank of New Zealand’s Monetary Policy Committee, as policymakers sought to counter inflationary pressures stemming from the fallout of the Iran war.

The RBNZ said persistently elevated inflation, which reached 4.1% in the second quarter, driven by a surge in fuel and energy prices resulting from the Middle East conflict, warranted further monetary tightening to bring inflation back within its 1% to 3% target range.

The central bank expects inflation to return to 2% by late 2027, with inflationary pressures gradually easing as the impact of the fuel-price shock fades.

The RBNZ also noted that economic growth in the country was weak in the second quarter and that the labor market was under pressure from rising unemployment.

The central bank said interest rates may need to rise further depending on economic and inflation developments, while stressing that the future path of interest rates is not predetermined.

The RBNZ added that its gradual approach to monetary policy tightening reduces the risk that larger rate increases will be required in the future.

Anna Breman

Reserve Bank of New Zealand Governor Anna Breman said there is no predetermined path for monetary policy and that the timing of any further interest rate increase remains uncertain.

Breman added that the central bank may need more time to assess the monetary policy stance and that the current interest rate is approaching neutral.

New Zealand interest rates

• Following the meeting, market pricing for a 25-basis-point interest rate hike at the RBNZ’s next meeting in October fell to below 50%.

• Investors will now await a series of key New Zealand economic releases on inflation, unemployment and economic growth to reassess those expectations.