New Zealand Dollar: RBNZ tightening supports upside – ABN AMRO

FXStreet Insights Team FXStreet

ABN AMRO’s Georgette Boele reports that the Reserve Bank of New Zealand lifted its policy rate by 25 bp to 2.5% and signalled more tightening is likely. Despite some easing in energy prices, the bank sees persistent inflation pressures and scope for further reduction in stimulus. With markets pricing additional hikes, ABN AMRO expects modest upside for the New Zealand Dollar versus the US Dollar.

RBNZ hikes and signals further tightening

"This week, the Reserve Bank of New Zealand raised its policy rate by 25bp to 2.5%."

"It also said that, with inflation still above target and economic activity expected to strengthen, further reduction in monetary stimulus is likely to be needed to bring inflation back to the 2% target midpoint."

"Future OCR decisions will depend on incoming data, price-setting behaviour and the strength of economic activity, and how these factors affect medium-term inflation pressures."

"The market is pricing in almost 40bp of additional rate hikes this year."

"As a result, we expect modest upside for the New Zealand dollar against the US dollar."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

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