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The Reserve Bank of New Zealand decided to keep interest rates unchanged at today’s meeting. The official interest rate remained unchanged at 5.5%, in line with market expectations. The move was prompted by an upward revision of the RBNZ’s interest rate forecasts and bearish comments from RBNZ Governor Orr.
RBNZ interest rate forecasts
- December 2023: 5.55% and 5.54% previous data.
- March 2024: 5.63% vs 5.58% previous data.
- June 2024: 5.67% vs 5.59% previous data.
- September 2024 (Peak): 5.69% vs 5.57% previous data.
- December 2024: 5.66% vs. 5.5% previous data.
- December 2025: 4.95% vs 4.51% previous data.
- December 2026: 3.55%.
He The RBNZ revised its rate forecasts upwards in the November monetary policy statement. Source: RBNZ
The RBNZ’s new rate forecast does not foresee rate cuts until mid-2025. Although inflation is expected to reach the 1-3% target in the third quarter of 2024, the growth projections do not suggest that the New Zealand economy will face a slowdown, as in previous projections.
In addition to the aggressive revision to rate forecasts, the New Zealand dollar received a boost from Governor Orr during a post-meeting press conference. Orr said the discussion at today’s meeting was about raising interest rates as central bankers were “nervous” about inflation remaining above the RBNZ’s target from early 2021. This shows that rate hikes are off the table in New Zealand and that an increase is possible. Next RBNZ meeting (February 28, 2024). However, money markets are not buying this detail as the OIS market sees only a 5% chance of a 25 basis point rate hike in February.
Source: Bloomberg Finance LP
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