08:01 AM EST, 11/26/2024 (MT Newswires) -- When the Reserve Bank of New Zealand (RBNZ) started cutting rates in August this year, it didn't surprise anyone, said Commerzbank.

It cut the cash rate by 25bps. However, the indication that a move of 50bps was being seriously considered did surprise some, wrote the bank in a note to clients.

As a small open economy, New Zealand is often one of the first to recognize changes in the global economy, stated Commerzbank. More often than not, the central bank isn't shy about responding to changing circumstances. This summer, the RBNZ's hint of a 50bps cut proved to be a harbinger for the United States Federal Reserve, which surprised markets by cutting rates by that amount in September.

At its last meeting in October, the RBNZ followed up its August hint with a 50bps cut. This week, the RBNZ will hold its last policy meeting of the year, and once again, the RBNZ's statement may be more interesting than the decision itself, pointed out the bank.

The RBNZ is slated to release its policy statement Tuesday, at 8 p.m. ET.

Financial markets are pricing in a 50bps move and the majority of economists agree, according to the Bloomberg survey. However, what RBNZ has to say about the increased uncertainties in the global trading system and so the global growth and inflation outlook is likely to be more decisive.

Looking beyond this week, markets are currently pricing in further significant moves from the RBNZ over the coming months, added Commerzbank. Another 50bps cut is almost fully priced in for the next meeting in February, another 25bps in April and a total of 150bps -- six steps of 25bps -- by the summer.

The bank thinks this is justified given the recent softening in inflation and economic growth. However, if the RBNZ were to focus on heightened international risks and their impact on inflation in New Zealand, markets might be forced to reconsider.