The Reserve Bank of New Zealand Kept Rates Unchanged Again but Delivered a Hawkish Message


RBNZ Hawkish Hold

The Reserve Bank of New Zealand has been very aggressive on the tightening front, having pulled the trigger on rate increases ahead of its major counterparts. Since the October 2021 lift-off, it has delivered 525 basis points worth of hikes. In a watershed moment in July though, it paused its tightening cycle. It has since stayed on the sidelines and today, it kept rates unchanged at 5.5% for fourth straight meeting. [1]

Inflation has been coming down and reached the lowest level in two years in the third quarter, at 5.6% y/y. However, it remains far from the central bank's 1-3% target and on a sequential basis, it accelerated at 1.1%, offering reasons for concern. The RBNZ alluded to that and said it is "wary of ongoing inflationary pressures".

As a result, the messaging was clearly more hawkish than the previous meeting. Policymakers warned that interest rates "would likely need to increase further", in case price pressure were stronger than anticipated. They also raised their forecasts, expecting the official cash rate (OCR) to peak at 5.7% (from 5.6% prior projection), implying another hike. [2] During his press conference, Governor Orr toned-down the hawkish messaging, saying that the committee retains optionality on the next moves. Even though he acknowledged the "upward bias" of OCR projection, he cautioned that this is "not a probability". [3]

The economy has largely performed better than expected, which could allow for a more aggressive stance. The central bank not see a repeat of the 0.9% q/q surprise Q3 GDP rebound, but does not expect a contraction anymore. It forecasts the economy to flat-line in the last quarter of the year and pick up from there on. The labor market conditions are easing, but officials see a shallower path to the increase in unemployment, projecting it to go as high as 5.2% (from 5.3% previously).

The decision took place just a few days after the new government was sworn in. The National Party that formed a coalition government, has a 100-Day Plan, which includes moving the RBNZ to a single-mandate mandate of price stability.

Trade the News: View our Economic Calendar

NZD/USD jumped to four-month highs after the hawkish hold of the RBNZ, but erases the gains as Governor Orr appeared reserved around more hikes.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.



Retrieved 29 Nov 2023


Retrieved 29 Nov 2023


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