Will New Zealand’s RBNZ surprise markets by resuming interest-rate hikes? – Crypto News – Crypto News
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Will New Zealand’s RBNZ surprise markets by resuming interest-rate hikes? Will New Zealand’s RBNZ surprise markets by resuming interest-rate hikes?

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Will New Zealand’s RBNZ surprise markets by resuming interest-rate hikes? – Crypto News

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  • The Reserve Bank of New Zealand is likely to maintain the interest rate at 5.50% in February.
  • RBNZ Governor Orr’s press conference and updated macro forecasts will grab the market’s attention.
  • The New Zealand Dollar gears up for a volatility spike on RBNZ Governor Orr’s words.

The Reserve Bank of New Zealand (RBNZ) will convene its first monetary meeting of 2024 on Wednesday. The RBNZ board members are expected to keep the Official Cash Rate (OCR) steady at 5.50% for the fifth meeting in a row. However, some economists are foreseeing the February meeting to be a “live” one, with upside risks for a rate hike.

The New Zealand Dollar (NZD) is set to witness intense volatility on a surprise rate hike or a hawkish hold by the RBNZ.

What to expect from the RBNZ interest rate decision?

The Reserve Bank of New Zealand will publish its first Monetary Policy Statement (MPS) of this year, including the updated economic forecasts, alongside the interest rate announcement on Wednesday at 01:00 GMT. RBNZ Governor Adrian Orr’s press conference will follow at 02:00 GMT.

Data published by Stats NZ showed that New Zealand’s annual Consumer Price Index (CPI) increased by 4.7% for the December quarter, the smallest annual rise in more than two years. However, the figure was still above the RBNZ’s target of 1.0%-3.0%.

Despite the CPI data indicating disinflationary conditions in New Zealand’s economy, the Australian and New Zealand Banking Group (ANZ) revised their rate call earlier this month, noting that “we now expect the RBNZ to hike the OCR 25 basis points (bps) in February and April, taking it to 6.0%.”

“We just don’t think the RBNZ will feel confident they’ve done enough to meet their inflation mandate,” the ANZ said.

However, the country’s falling inflation expectations nudged markets to reprice their expectations for the RBNZ interest rate outlook. Two-year inflation expectations, seen as the timeframe when RBNZ policy action will filter through to prices, fell to 2.5% from 2.76% in the December quarter, the central bank’s quarterly survey showed.

Further, Stats NZ’s Selected Prices Indexes (SPI) showed that the annual increase in inflation actually fell to 6.8% in January from 7.0% in December.

At its November policy meeting, the RBNZ said that “if inflationary pressures were to be stronger than anticipated, the OCR would likely need to increase further,” adding that “the Monetary Policy Committee agreed that interest rates will need to remain at a restrictive level for a sustained period of time.” The central bank projected a peak OCR of 5.69% in the September quarter of 2024, leaving the door ajar for one more rate hike this year.

Previewing the RBNZ policy announcement, analysts at BBH noted: “Reserve Bank of New Zealand meets Wednesday and is expected to keep rates steady at 5.50%. It will release its Monetary Policy Statement with updated macro forecasts at the same time. Markets see around 25% odds of a 25 bp hike this week and the focus will be on the updated rate path projections.”

“We doubt the revised RBNZ projections will rule out an additional policy rate increase because of stronger than expected non-tradable inflation and private sector wage growth in Q4. As such, NZD risks are skewed to the upside,” the analysts added.

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

Should the RBNZ surprise markets with a 25 bps rate hike or raise the forecast for the peak rate to 6.0%, the New Zealand Dollar is likely to meet a fresh buying wave against the US Dollar. In case of any hawkish surprises, the NZD/USD pair could stage a solid rebound toward the 0.6250 level.

On the other hand, if RBNZ Governor Orr’s comments are balanced, suggesting a “higher for longer” interest rate view, the NZD/USD correction is expected to gain traction, knocking the pair down toward the 0.6100 barrier. Additionally, a dovish pause by the central bank could also spell doom for the Kiwi.

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 battling the critical 50-day Simple Moving Average (SMA) at 0.6180 on its corrective downside. The 14-day Relative Strength Index (RSI) indicator, however, is still holding above the midline, suggesting that risks remain skewed to the upside for the pair.”

“The immediate upside hurdle is seen at the 0.6220 round level, above which the July 27 high of 0.6274 will come into play. NZD buyers will then aim for the 0.6300 figure. Conversely, a sustained move below the 50-day SMA at 0.6180 could open doors for a test of the 0.6100 mark. Further south, the 200-day SMA at 0.6075 could come to the rescue of NZD/USD,” Dhwani adds.  

Economic Indicator

New Zealand RBNZ Monetary Policy Statement

At each of the Reserve Bank of New Zealand (RBNZ) seven meetings, the RBNZ’s Monetary Policy Committee (MPC) releases a post-meeting statement explaining its policy decision. The statement may influence the volatility of the New Zealand Dollar (NZD) and determine a short-term positive or negative trend. A hawkish view is considered bullish for NZD, whereas a dovish view is considered bearish.

Read more.

Next release: 02/28/2024 01:00:00 GMT

Frequency: Irregular

Source: Reserve Bank of New Zealand

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Adrian Orr’s press conference.

Central banks FAQs

Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.

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