The Reserve Bank of New Zealand will decide on its key interest rate tonight or, more precisely, early on Wednesday morning. The current policy rate level of 5.5% has been in place since last May and is the highest since 2008, notes Commerzbank FX analyst Volkmar Baur.
All eyes on the RBNZ
“According to Bloomberg, nine out of 23 analysts surveyed expect the RBNZ to begin a rate-cutting cycle, while the market is pricing in a 60% chance of a 25 basis point cut tomorrow. And there are good reasons for this. Economic indicators such as the PMI have been quite weak of late. Consumer confidence has fallen sharply and the construction sector remains under pressure. However, a survey last week provided perhaps the best reason.”
“It showed that inflation expectations for next year and 2026 have fallen, the latter even to 2.03%, returning to the central bank’s target. However, all of this is offset by the labour market, which remains very robust, with wage growth still above 4%. This is also likely to be a key reason why inflation itself remains around 4% year-on-year, while inflation momentum is not much lower. Overall, the RBNZ should err on the side of caution.”
“Whether it cuts tomorrow or prefers to wait until October, we expect the RBNZ to be more dovish than the Reserve Bank of Australia. But the market is already pricing this in. Eight rate cuts are expected for New Zealand between now and July next year, compared with just three for Australia. If the difference is not as pronounced as currently priced, this would support the Kiwi against the Australian dollar.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
