The New Zealand dollar has pushed higher on Wednesday. NZD/USD is up 0.54%, trading at 0.6124 in the European session at the time of writing. The New Zealand dollar rose as high as 0.6152 (0.80%) in the Asian session after the RBNZ meeting but has pared much of these gains.
RBNZ holds rates but says inflation too high
The Reserve Bank of New Zealand held the cash rate at 5.5% at today’s meeting, as expected. This marks the seventh straight time that the RBNZ has held rates, as it continues its “higher for longer” rate policy.
The monetary policy statement was decidedly hawkish and this provided a boost for the New Zealand dollar. The statement noted that rates might have to remain at a restrictive level for longer than anticipated … to ensure the inflation target is met”.
This language was surprisingly hawkish and was indicative of the RBNZ’s frustration at the slow decline in inflation. New Zealand’s inflation rate has fallen sharply but the first-quarter figure of 4% was higher than the 3.8% forecast of the central bank. The RBNZ’s steep rate-tightening cycle has slashed inflation but it remains at double the midpoint of the 1-3% target range.
The RBNZ has pushed back its expectation of CPI falling within the target range of 1-3% from the third quarter of this year to the fourth quarter. More importantly, the RBNZ has raised the possibility of a rate hike before the end of the year to 60%. The money markets remain more optimistic that rates have peaked and have priced in three rate cuts in the fourth quarter.
NZD/USD Technical
- There is resistance at 0.6185 and 0.6235
- 0.6039 are the next support levels
