RBNZ – Keeping a hawkish bias

In the last RBNZ meeting on February 22 markets were expecting a 50 bps rate hike. The surge in inflation had shown some signs of topping with January’s print coming in the same aster prior.
The QoQ reading was at 1.4% for January which was at the lower end of the recent range.
However, the RBNZ did not take comfort from this and hiked by 50bps (as expected) and maintained its views for a terminal rate of 5.50%. The committee considered a hike of 75 bps and this was noted as a potential catalyst for sending AUDNZD lower prior to the event. The recent impact of Cyclone Gabrielle was seen as unlikely to impact the medium term monetary policy outlook although some short term prices spikes were expected as a direct impact in the near term.

Inflation still too high

The recent pullback in inflation pressures were noted, but the RBNZ still considered core consumer inflation too high. The annual CPI projection was therefore revised higher to 4.2% for March 2024, which was down from the previous of 3.8%.

The takeaway

The RBNZ are not slowing from their interest rate hiking cycle in contrast to the speculation before the meeting. This allowed the NZD to strengthen against the AUD immediately out of the meeting sending the AUDNZD lower,
Going forward inflation data will be key and any big jumps lower in NZD inflation data will allow sudden weakness to creep into the NZD. This would be the best opportunity for short term traders to look out for. Next NZD inflation data is out on April 19th and Food inflation on March 12th. Another opportunity for NZD weakness would be if the labour market shows signs of loosening (i.e job losses). Near term AUDNZD selling makes sense, but watch events for from the RBA closely

8 thoughts on “RBNZ – Keeping a hawkish bias”

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