09:14 AM EST, 11/27/2025 (MT Newswires) -- The Reserve Bank of New Zealand cut the cash rate by 25bps to 2.25% this week, as widely expected, said UBS.

However, its explicit easing bias has been removed, and Governor Christian Hawkesby, at his last press conference, signaled that a hike would become more likely after mid-2026. Separately, he'll be succeeded by Anna Breman in

December 2025 for a five-year term.

UBS expects a prolonged hold over 2026 before modest monetary tightening begins the following year.

On the economy, the bank predicts inflation to moderate, but remain slightly elevated. UBS also forecasts

a modest recovery in gross domestic product growth alongside stabilization in the labor market.

Money markets sharply repriced cash rate expectations after the announcement, with almost +10bps now priced by Q4 2026 versus -7bps on Monday, stated the bank.

So, UBS believes the low point of the NZD/USD is behind, although the bank estimates the AUD/NZD pair to reach 1.20 next year. UBS also continues to like selling the downside in the NZD/USD at 0.56 or below.