The Reserve Bank of New Zealand has today raised the Official Cash Rate by 50 basis points to 2.00%, a follow up to its 50bp rate hike in April.
While this was widely expected, a surprise came as the RBNZ revised the OCR terminal rate to 3.9% in June 2023 from its earlier 3.35% forecast.
Since the April meeting, inflation has accelerated, most recently printing at 6.9%, more than twice the top of the RBNZ’s 1-3% target band.
“The Committee is resolute in its commitment to ensure consumer price inflation returns to within the 1 to 3 percent target range. “
In the lead up to today’s meeting, most economists were expecting the terminal rate to be raised marginally higher to 3.5%, because earlier interest rate hikes were having the desired impact. The housing market and consumption are cooling, and business and household surveys have weakened.
“Asset prices, in particular house prices, have also declined, reflecting in part higher mortgage interest rates and increased supply of housing”
The NZDUSD rose sharply after the announcement from .6425/27 to a high of .6500c. Based on expectations, the OCR will rise to at least 3.25 per cent this year, the NZDUSD should be well supported on dips back towards .6470/50.
A break of resistance at .6500c should then see the NZDUSD take flight towards .6600c.
Source Tradingview. The figures stated are as of May 25, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
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