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.
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. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 29 Nov 2023 https://www.rbnz.govt.nz/hub/news/2023/11/monetary-policy-to-remain-restrictive | |
| Retrieved 29 Nov 2023 https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/monetary-policy-statements/2023/november/mpsnov23.pdf | |
| Retrieved 17 Apr 2026 https://www.national.org.nz/100-dayplan |
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.