On Wednesday (May 28), the New Zealand dollar (NZD) against the US dollar maintained a consolidating pattern during the Asian session, hovering in the high range above 0.6000. Previously, the exchange rate had strongly surpassed the psychological barrier of 0.6000 on Monday, reaching a new high for the year, which drew significant market attention to the Reserve Bank of New Zealand's (RBNZ) monetary policy stance.
The market widely anticipates that the Reserve Bank of New Zealand will announce a 25-basis-point interest rate cut in today's rate decision, lowering the Official Cash Rate (OCR) from 3.50% to 3.25%. Given that this expectation has been fully absorbed by the market, investors are more focused on whether the central bank will adjust its forward guidance for future rate paths.
In its February monetary policy statement, the Reserve Bank of New Zealand projected the OCR to drop to 3.1% in the first quarter of 2026. However, considering the deteriorating global economic outlook and uncertainties arising from US trade policy, the market assesses that the central bank may further lower the terminal rate target below 3%, with the probability of it dropping to 2.75% within the year already rising to 60%.
Inflation data has become an important variable affecting policy making. Data shows that New Zealand's Consumer Price Index (CPI) for the first quarter rose 2.5% year on year, exceeding the market's expectation of 2.3% and the previous value of 2.2%. Additionally, the second-quarter two-year inflation expectation also rose to 2.29%, higher than the previous quarter's 2.06%, indicating persistent inflationary pressures.
Although the Reserve Bank of New Zealand leans towards continuing accommodative policy and leaving room for further rate cuts in the future, the current upward inflation trend may make it more cautious with timing. The market widely expects that if inflationary pressures persist, the next rate cut might be postponed until after the July or August meeting.
From a technical perspective, the NZD/USD faces some selling pressure near key resistance levels and is expected to continue with a volatile pattern in the short term, waiting for policy clues to become clearer.
