RBNZ looks set to hold key interest rate steady, keeping hawkish bias

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After the July policy meeting conducted on Wednesday, the Reserve Bank of New Zealand (RBNZ) board members decided to keep the Official Cash Rate (OCR) steady at 5.50%.

The decision was widely in line with the market expectations.

Summary of the RBNZ Monetary Policy Statement (MPS)

Committee agreed that monetary policy will need to remain restrictive.

The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures.

Some domestically generated price pressures remain strong.

But there are signs inflation persistence will ease in line with the fall in capacity pressures and business pricing intentions.

Current and expected govt spending will restrain overall spending in economy.

The level of economic activity, including business and consumer investment spending and investment intentions, is consistent with the restrictive monetary stance.

The positive impact of the pending tax cuts on private spending is less certain.

Minutes of the RBNZ interest rate meeting

Committee agreed that monetary policy will need to remain restrictive.

Members noted a risk that domestically driven inflation could be more persistent in the near term.

Headline inflation is expected to return to within the 1 to 3 percent target range in the second half of this year.

Committee is confident that inflation will return to within its 1-3 percent target range over the second half of 2024.

The appropriate stance of monetary policy was discussed.

NZD/USD reaction to the RBNZ interest rate decision

The New Zealand Dollar came under intense selling pressure in an immediate reaction to the RBNZ ’s hold decision. The NZD/USD pair currently trades around 0.6100, down 0.40% on the day. 

New Zealand Dollar PRICE Today

The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the weakest against the US Dollar.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   -0.00% -0.03% 0.13% -0.03% 0.03% 0.46% 0.05%
EUR 0.00%   0.00% 0.16% 0.00% 0.02% 0.43% 0.03%
GBP 0.03% -0.00%   0.14% 0.01% 0.02% 0.43% 0.02%
JPY -0.13% -0.16% -0.14%   -0.13% -0.11% 0.27% -0.13%
CAD 0.03% 0.00% -0.01% 0.13%   0.05% 0.45% 0.02%
AUD -0.03% -0.02% -0.02% 0.11% -0.05%   0.41% -0.02%
NZD -0.46% -0.43% -0.43% -0.27% -0.45% -0.41%   -0.42%
CHF -0.05% -0.03% -0.02% 0.13% -0.02% 0.02% 0.42%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).

New Zealand Dollar FAQs

The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.

The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.

Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.

The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.


This section below was published at 21:15 GMT on Tuesday as a preview of the Reserve Bank of New Zealand (RBNZ) policy announcements.

  • The Reserve Bank of New Zealand is expected to keep rates on hold at 5.50% on Wednesday.
  • Upside risks to inflation to offset economic concerns, prompting RBNZ to delay any dovish shifts.
  • The New Zealand Dollar gears up for intense volatility on the RBNZ policy announcements.

Following its July monetary policy meeting on Wednesday, the Reserve Bank of New Zealand (RBNZ) is set to hold the Official Cash Rate (OCR) at 5.50%, extending the pause into an eighth meeting in a row.

It’s expected to be a straightforward event, with no press conference from RBNZ Governor Adrian Orr and the release of updated economic projections. However, any changes to the RBNZ’s communication could spark a big reaction in the New Zealand Dollar (NZD).

What to expect from the RBNZ interest rate decision?       

With discouraging economic performance alongside the persistence of inflation risks, a rates on-hold decision by the RBNZ is widely anticipated by market participants. Therefore, they will look for fresh hints on the timing of the dovish policy pivot in the central bank’s Monetary Policy Statement (MPS).

New Zealand’s annual Consumer Price Index (CPI) increased by 4% in the first quarter, according to data released by Stats NZ, following a 4.7% growth in the 12 months to the December 2023 quarter.

Even though there was progress in disinflation, the non-tradable inflation remained a cause for concern. Non-tradeable inflation was 5.8% in the year to the March quarter, a tad lower than the 5.9% figure seen in the final quarter of 2023.

Meanwhile, Stats NZ showed on June 19 a 0.2% increase in GDP in the first quarter, breaking a streak of quarterly GDP declines that had led to the country’s recession in the second half of 2023.

These data sets are likely to support potential delays in the dovish changes to the policy statement’s language, despite some analysts arguing against them amidst declining domestic consumer confidence and the deepening contraction in the manufacturing and services sectors.

ANZ – Roy Morgan New Zealand Consumer Confidence fell to 83.0 in June from the previous month’s 84.9, sticking close to multi-year lows in the sentiment index. The Business NZ Performance of Services Index (PSI) dropped to 43.0 in May from April’s 46.6 while the Business NZ Performance of Manufacturing Index (PMI) contracted to 47.2 in May, following a 48.8 figure in April.

Previewing the RBNZ policy announcement, analysts at TD Securities noted: “While there are signs of cracks in the economy (e.g., labor market easing, contractionary PMIs), we don’t think the RBNZ is in any urgency to ease given the upside risks to inflation, especially from services.”

How will the RBNZ interest decision impact the New Zealand Dollar?

The NZD/USD pair is on the front foot heading into the RBNZ showdown on Wednesday, in the aftermath of the US Dollar (USD) demise induced by Friday’s US labor market data for June. The downward revisions to the April and May employment data prompted investors to ramp up bets that the US Federal Reserve (Fed) will lower interest rates in September.

Furthermore, expectations that the RBNZ will refrain from making any dovish tweaks before the July 16 second-quarter inflation report, help the pair maintain its recent upswing.

“Market has more than fully priced in a November rate cut, with 60% odds of an earlier cut in October,” per BBH Analysts.

If the MPS remains wary of the upside risks to inflation, in the face of sticky non-tradeable goods and services inflation alongside the May Budget release, the Kiwi Dollar could see a fresh leg higher to the June high of 0.6222. On the other hand, NZD/USD is seen falling back toward 0.6000 should the RBNZ do away with its hawkish guidance, hinting at a policy pivot later this year.

Dhwani Mehta, FXStreet’s Senior Analyst, offers a brief technical outlook for trading the New Zealand Dollar on the RBNZ policy announcements: “The NZD/USD pair is consolidating the previous week’s recovery, deriving strength from a bullish 14-day Relative Strength Index (RSI) on the daily time frame.”

“The next bullish target for the Kiwi is seen at the June high of 0.6222, above which the 0.6250 psychological level will challenged. Further up, the 0.6300 threshold will be in sight. Alternatively, a failure to defend the confluence of 100-day and 200-day SMAs at 0.6070 could open the downside toward the 0.6000 level,” Dhwani adds.  

Economic Indicator

RBNZ Interest Rate Decision

The Reserve Bank of New Zealand (RBNZ) announces its interest rate decision after its seven scheduled annual policy meetings. If the RBNZ is hawkish and sees inflationary pressures rising, it raises the Official Cash Rate (OCR) to bring inflation down. This is positive for the New Zealand Dollar (NZD) since higher interest rates attract more capital inflows. Likewise, if it reaches the view that inflation is too low it lowers the OCR, which tends to weaken NZD.

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