What’s up, news traders?
If you’re gearing up to trade this week’s RBNZ interest rate statement, here’s what you gotta know about what happened before and what analysts are expecting this time.
What happened last time?
- RBNZ hiked rates by 0.50% to 2.50% in July decision
- Policymakers reiterated their goal of bringing inflation back to 1-3% target
- Global growth is slowing but New Zealand domestic activity remains resilient
As widely expected, New Zealand’s central bank hiked interest rates from 2.00% to 2.50% in their July statement. This marked their third consecutive 0.50% hike and sixth overall since October last year.
Their official statement indicated that the pace of tightening is appropriate to “maintain price stability and support maximum sustainable employment.”Policymakers also acknowledged that domestic growth remains resilient, even as the global economy faces strong headwinds from the pandemic and the war in Ukraine.
However, RBNZ officials also warned that there are more upside risks to inflation and emerging challenges to economic activity.
NZD Pairs 15-min Forex Charts Overlay
With that, the Kiwi actually dipped during the actual announcement before getting back up on its feet and cruising higher against the dollar and yen for the rest of the session.
Of course market sentiment stole the spotlight later on when Uncle Sam printed a fresh batch of CPI readings, causing NZD pairs to toss and turn during the U.S. session.
What’s expected this time?
- RBNZ still likely to hike by another 0.50% to bring OCR to 3.00%
- Focus will be on the OCR path for the next few months
Another 0.50% interest rate hike is expected from the RBNZ this month, bringing their official cash rate up by 2.75% since the start of their tightening cycle last year.
The question is, will there still be enough firepower for the RBNZ to keep warding off inflation if it persists?While the actual decision was likely priced in waaay back and might not generate much of a reaction from the Kiwi, the RBNZ’s forward guidance for interest rates might have more of an impact.
The latest OCR path suggested it could reach 3.50% by the end of this year, which might mean a slower pace of tightening in the coming months. It is projected to hit 4.00% by 2023 then staying at that level for the rest of the year.
Any hawkish change in this outlook could mean more upside for the Kiwi while more cautious comments from policymakers could trigger strong profit-taking.
Either way, make sure you adjust your entries and exits for additional volatility when trading this major event!
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.
