Heading into the RBNZ meeting, markets were not expecting a change in interest rates. The RBNZ kept rates unchanged at 5.5% as expected and noted little changes from the previous meeting. However, the emphasis that the RBNZ did make was the near-term risk that inflation measures don’t slow down as much as expected. The committee once again agrees that the official cash rate needed to stay restrictive for the foreseeable future in a repeat of the line from the previous statement.
Higher interest rates for longer
The RBNZ did note that it expects inflationary pressures to be marginally higher over coming years and, as a result, interest rates may need to remain near their current levels for slightly longer to slow demand. This ‘higher for longer’ narrative to deal with ‘stickier inflation’ is a narrative that may prove to be more popular amongst central banks as inflation still remains high around the world.
The RBNZ noted that annual consumer price inflation eased from 6.7 to 6.0 percent in the June 2023 quarter. However, the RBNZ noted that it would take some time for inflation to return to the mid-point of the MPC’s 1 to 3% target range.
Governor Orr in the press conference
Governor Orr stated that the RBNZ is very happy with where the official cash rate is and that the rise in the nominal neutral cash rate by 25bps is not forward guidance or a strong signal of the RBNZ’s next move. He also said there was not much discussion of a rate cut and that the RBNZ is ready to work through the data noise in the near term.
The reaction in the NZD
The NZD gained against the AUD on the initial reaction, sending the AUDNZD pair lower. This makes sense on a higher for longer narrative and pushed the AUDNZD into major support around 1.0800 which is also the 50% fib level from the May to June swing. There is not a whole lot to glean from the meeting and much is unchanged. Key levels to watch on the AUDNZD pair are below.
Our products and commentary provides general advice that do not take into account your personal objectives, financial situation or needs. The content of this website must not be construed as personal advice.
Recommended Content
Editors’ Picks
AUD/USD: Strong resistance lies at 0.6300
The marked sell-off in the US Dollar allowed AUD/USD to regain strong upside traction and reach multi-day highs in the area just below the key 0.6300 barrier at the beginning of the week.
EUR/USD: Bulls need to clear 1.0400 on a convincing fashion
In line with the rest of the risk-associated complex, EUR/USD managed to regain marked buying pressure and flirted with the area of three-week highs around 1.0430 on Monday.
Gold remains focused on all-time highs
Gold stays in positive territory above $2,700 on Monday as the improving risk mood makes it difficult for the US Dollar to find demand. Markets await US President Donald Trump's speech at the inauguration ceremony.
Solana Price Forecast: Are US traders dumping Bitcoin and XRP for SOL?
Solana (SOL) price stabilized near the $250 support level on Monday, having declined 10% from its all-time high over the last 24 hours.
GBP/USD stays defensive below 1.2200, awaits Trump 2.0
GBP/USD struggles to gain traction and trades slightly below 1.2200 in the second half of the day on Monday. Markets' nervousness ahead of US President-elect Donald Trump's inauguration drag the pair lower despite a broadly weaker US Dollar.
Trusted Broker Reviews for Smarter Trading
VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.