RBNZ expected to keep rates unchanged

The Reserve Bank of New Zealand is expected to keep rates on hold at 5.50% following its July monetary policy meeting. Market participants are expected to see a rates on-hold decision due to discouraging economic performance and inflation risks. They will look for fresh hints on the timing of the dovish policy pivot in the central bank’s Monetary Policy Statement (MPS).

New Zealand’s annual Consumer Price Index (CPI) increased by 4% in the first quarter, following a 4.7% growth in the 12 months to the December 2023 quarter. Non-tradeable inflation remained a concern, with non-tradeable inflation being 5.8% in the year to the March quarter, a tad lower than the 5.9% figure seen in the final quarter of 2023.

The NZD/USD pair is on the front foot heading into the RBNZ showdown on Wednesday, following the US Dollar (USD) demise induced by Friday’s US labor market data for June. Expectations that the RBNZ will refrain from making any dovish tweaks before the July 16 second-quarter inflation report help maintain its recent upswing.