The Reserve Bank of New Zealand (RBNZ) kept interest rates unchanged at 5.50% today. The statement was relatively more hawkish than before, causing a sharp appreciation of the New Zealand dollar (NZD). However, during the subsequent press conference, Governor Orr adopted a more dovish stance, leading to a slight reduction in the gains.
The central bank maintained the official cash rate at 5.50%, as widely expected by the market, but raised the projected path for the OCR, expressing continued concern about domestic inflationary pressures and capacity constraints in the economy. Nonetheless, it is anticipated that by the end of 2024, annual CPI inflation will fall to the target range of 1.00-3.00%. The New Zealand economy is experiencing eased labor market pressures, with more cautious hiring by firms and an increase in the labor force. Wage growth and domestic spending are more aligned with the inflation target. However, certain sectors, such as housing rents, insurance costs, and council rates, remain less sensitive to interest rate changes, creating challenges in bringing inflation to the target. The Committee also noted that while government spending is expected to decrease, the potential impact of changes in the upcoming budget, particularly tax cuts, remains uncertain and poses a risk of increasing aggregate demand forecasts.
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Open account Try demo Download mobile app Download mobile appExpectations for the first rate cut have diminished, but the market still prices in the first full cut in November 2024. Meanwhile, the possibility of a cut in October has been practically ruled out for now.
NZDUSD (M15 interval)
Right after the RBNZ decision was announced, there was a dynamic upward movement in the NZDUSD pair. Then, NZDUSD began a gradual reduction in gains, which accelerated somewhat during Governor Orr's press conference. At the time of publication, NZDUSD is up 0.35% to 0.61130.
Source: xStation 5
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