Heading into the last RBNZ meeting short-term interest rate markets were pricing in a 100% chance of a 50 bps rate hike and a 67% chance of a 75 bps rate hike. The RBNZ delivered that 50 bps rate hike and affirmed the aggressive path of rate hikes from May’s meeting. As a reminder, the RBNZ’s May projection is to raise the OCR rate (interest rate) to a level that brings consumer inflation down:

  • May projection for the OCR for Sep 2022 at 2.68%.

  • May projection for the OCR for June 2023 is now at 3.88%.

  • May projection for the OCR for Sep 2023 is now at 3.95%.

The RBNZ then saw interest rate dropping in June 2025 to 3.5%. So, at face value, it was a completely ‘as planned meeting’.

Hints at slowing growth

Although the decision was broadly in line with what was expected we did caution before the July 13 meeting that the main focus for the meeting was likely to be the future path of growth. This was especially after we noted a research piece from the Bank of New Zealand which projected that New Zealand could enter into a recession in 2023. The BNZ’s head of research warned that the latest ANZ Bank’s survey of business opinion was ‘littered with indicators that fit with our view that the economy is headed into recession’.

Slowing growth hints did make it into the July statement as the RBNZ said, ‘Members noted that while there are near-term upside risks to consumer price inflation, there are also medium-term downside risks to economic activity’. The main message from the RBNZ was that price pressures remain persistent enough to carry on with their rate hiking outlook from May. However, the RBNZ did note the downside risks.

The takeaway

This means that going forward any further signs of New Zealand’s economy slowing down could result in further expectations of the RBNZ recognising these downside risks. This could weaken the NZD. For now, the NZD remains a ‘buy on deep dips’, but the AUDNZD could end up pushing higher if the RBA and the RBNZ’s policies diverge. So, look for the scenario where the RBNZ starts to signal a lower path of rates while the RBA sticks to its rate hiking script. This could create an upside bias for the AUDNZD. This is not an obvious trade to take at the time of writing, but it is one to keep on the radar. Watch incoming New Zealand data.


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