NZD Slides as RBNZ Raises Rates, Delivers Dovish Guidance

The New Zealand Dollar plummeted 1.0% to $0.5834 after the Reserve Bank of New Zealand raised its Official Cash Rate by 25 basis points to 2.75%. This move was expected by markets, but the central bank's forward guidance caught traders off guard.

The RBNZ lowered its Q4 average OCR forecast and emphasized that the future rate path is 'not pre-determined', sparking a sharp selloff in the kiwi despite the back-to-back rate increase. Markets had positioned for a more aggressive tightening signal, but instead received a dovish tilt in the bank's projections.

The key disappointment was the RBNZ's stress on spare capacity, soft growth, and two-sided risks, which reduced urgency for accelerated hikes. The central bank also highlighted that core inflation excluding vehicle fuels had eased to 2.9%, well within the 1-3% target band.