Rbnz To Keep Rates Steady

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Rbnz To Keep Rates Steady

Rbnz To Keep Rates Steady At 5.50%

According to analysts from ING, the Reserve Bank of New Zealand (RBNZ) will maintain the OCR at 5.50% with no change.

The upcoming meeting of the RBNZ is scheduled on 22 May where the central bank will discuss monetary policy including the interest rates in the country.

Non-Tradable Inflation At 5.8% During Q1

While no change is expected in the OCR, the markets will be looking at new economic projections made by the RBNZ. At the same time, the market players will also look for any changes in the statement regarding the OCR.

Unlike most of the other central banks, the policy announcements by RBNZ happen with less frequency. Additionally, the bank focuses more on job and inflation data rather than sentiment.

New Zealand has been struggling with persistent inflating that remains higher than the bank's comfort range. The non-tradeable inflation, in particular, has registered a 5.8% value during the Q1, higher than the 5.3% forecast.

Similarly, the overall inflation in the country is now sitting at 4.0%, a little higher than the forecast of 3.8% made by the RBNZ.

However, a weak labor market means the headline inflation will likely fall to 3.6% y/y during Q2 2024. Despite this, the RBNZ will keep a close eye on this particular inflation metric as the risks are still high.

Meanwhile, the economic indicators show a weakness in employment and even economic growth. During Q1 2024, the unemployment rate turned higher towards 4.3% with a deceleration in wage growth. In fact, New Zealand's economy even went into recession as the economy showed a -0.1% decline q/q.

Despite all of this, the RBNZ is expected to keep this hawkish policy intact with no change in the rate projections. In fact, the RBNZ will likely go ahead with a small rate hike this year and then move towards policy easing in 2025.

Amidst all of this, the NZD has gained almost 3.7% since the start of May 2024 and has managed to become the best-performing currency among its peers.

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