On Wednesday, November 27th at 09:00 Beijing time, the Reserve Bank of New Zealand will hold an interest rate decision. The market expects the Reserve Bank of New Zealand to cut interest rates by 50 basis points for the second consecutive time, becoming one of the most aggressive Western central banks to cut interest rates.

Among the 23 economists surveyed in the market, 22 predict that the Reserve Bank of New Zealand will cut interest rates by 50 basis points on Wednesday, bringing the rate down to 4.25%. An economist predicts a 75 basis point interest rate cut.

ASB Bank economist Nick Tuffley predicts that the Reserve Bank of New Zealand will cut interest rates by 50 basis points in its November Monetary Policy Statement (MPS), bringing the rate down to 4.25%. This measure will bring the official cash rate closer to the neutral level of 3% to 4%, which is the balance point needed to stabilize inflation and support the economy.

Tuffley added that a 50 basis point rate cut is the best way to balance various risks. Given that the current economic environment is consistent with the previous forecast of the Reserve Bank of New Zealand, a larger 75 basis point rate cut may be too aggressive.

He also stated, "With the normalization of monetary policy basically completed, we expect that the official cash rate will face a higher threshold for changes after 2025." He also added that the Reserve Bank of New Zealand may adopt a gradual approach to implement future interest rate cuts.

New Zealand's economy has stagnated, with inflation slowing faster than policy makers had anticipated, prompting them to restore benchmark interest rates to a more neutral level that no longer limits economic growth. Investors are betting that the Reserve Bank of New Zealand will lower its cash rate to 3.25% in the second half of next year, but the pace of easing remains uncertain due to lingering concerns about global inflation following Trump's victory in the US election.

Wednesday's resolution is the final decision of the Reserve Bank of New Zealand for 2024, with a 12 week gap until the next meeting in mid February.

Sharon Zollner, Chief New Zealand Economist at ANZ Bank, stated that a 50 basis point rate cut is clearly the path with the least resistance. Given the confidence of the Reserve Bank of New Zealand in the inflation outlook and the unusually long gap before the next meeting, a significant rate cut does seem more likely than a small one in case of any unforeseen circumstances.

Economists expect that when the Reserve Bank of New Zealand updates its forecast on Wednesday, it will signal a smaller rate cut for 2025. Most people predict that the cash interest rate will drop to 3.5% by the middle of next year, which will put it near a neutral level.

Kiwibank Chief Economist Jarrod Kerr said, "The inflation beast has been eliminated. We need the Reserve Bank of New Zealand to quickly relax its controls to avoid causing further unnecessary damage to the economy

Ray Attrill, head of foreign exchange strategy at the National Australia Bank, said, "Given that Trump may implement tariffs in the first half of 2025, this will impact global growth prospects and will not provide any support for the New Zealand dollar. Therefore, we do not rule out the possibility of the New Zealand dollar falling to 0.55 against the US dollar next year

The forecast of Western Pacific Bank is that the New Zealand dollar will fall to 0.58 against the US dollar by the end of the year, with a minimum target of 0.55 for this year or the first quarter of next year.

NZD/USD daily chart