PREVIEW: RBNZ Policy Announcement due Wednesday 18th February at 01:00GMT/20:00EST

• RBNZ is expected to keep rates unchanged on Wednesday, with a Reuters poll showing unanimous expectations for a pause.
• RBNZ delivered a third consecutive cut at the last meeting for a total of 325bps of cuts since the rate-cutting cycle began in August 2024.
• Rhetoric and data suggest a pause in Governor Breman’s first policy meeting, while focus will also be on the central bank’s OCR projections.

OVERVIEW: The RBNZ will announce the decision of its first policy meeting of the year on Wednesday, where it is widely expected to keep the Official Cash Rate unchanged at 2.25% as a recent Reuters poll showed all 31 economists surveyed expect the central bank to refrain from any rate adjustments, while money markets are pricing a 98% probability of no change. The meeting will also be the first under Governor Breman, who took office in December.

RBNZ CUT RATES AT THE LAST MEETING FOR THE THIRD CONSECUTIVE OCCASION: At its previous meeting in November, the RBNZ cut rates by 25bps, its third consecutive reduction, bringing cumulative easing to 325bps since it began its rate-cutting cycle in August 2024. The bank left the door open to further moves, saying future changes to the OCR would depend on how the outlook for medium-term inflation and the economy evolves, although its projections implied a pause through 2026. The RBNZ noted that annual consumer inflation rose to 3% in the September quarter but said spare capacity in the economy should see inflation fall to around 2% by mid-2026, with risks to the outlook balanced. Then-Governor Christian Hawkesby said policymakers were well placed to mitigate risks and that the central projection was for the Cash Rate to remain on hold through 2026, while retaining full optionality with every option on the table. He later acknowledged the bank had lowered the cash rate significantly and was more confident the OCR was now stimulatory, adding that the hurdle for further cuts was high and that it could not keep the door open to easing indefinitely.

RHETORIC FROM RBNZ GOVERNOR BREMAN AND DATA SUGGESTS A LACK OF URGENCY TO TWEAK POLICY: RBNZ Governor Breman has signalled openness to further adjustments, but without urgency, saying the RBNZ had made significant progress towards its mandated objectives and was closely monitoring data, including inflation and GDP. She said there was no preset course for monetary policy and that the bank would adjust if the inflation outlook changed. Breman added that the economic outlook had evolved broadly in line with expectations and that the forward path for the OCR published in the November monetary policy statement pointed to a slight probability of another cut in the near term, although if conditions evolve as expected, the OCR is likely to remain at 2.25% for some time. The data releases also suggest that further rate cuts are currently unwarranted after New Zealand’s economy returned to growth in Q3 with GDP Q/Q at 1.1% vs. Exp. 0.9% (Prev. -0.9%, Rev. -1.0%) and GDP Y/Y at 1.3% vs. Exp. 1.3% (Prev. -0.6%, Rev. -1.1%), while inflation in Q4 was firmer-than-expected with CPI Q/Q at 0.6% vs. Exp. 0.5% (Prev. 1.0%) and Y/Y at 3.1% vs. Exp. 3.0% (Prev. 3.0%). Furthermore, Q4 jobs data was mixed as Employment Change topped forecasts at 0.5% vs. Exp. 0.3%, but the Unemployment Rate surprisingly ticked higher to 5.4% vs. Exp. 5.3% (Prev. 5.3%), which coincided with a rise in the Participation Rate.

ANNOUNCEMENT: The rate decision is due on Wednesday at 01:00GMT/20:00EST, and as a pause in rates is widely seen as a forgone conclusion, the attention will then turn to the statement for clues on future policy and for the latest rate path projections, as the previous OCR view Monetary Policy Statement showed expectations for the central bank to keep rates unchanged throughout the year. Furthermore, RBNZ Governor Breman will then conduct a post-meeting press conference, which will begin an hour after the initial announcement.