NZD/USD: RBNZ will deliver two more half-point hikes, fueling a return to 0.70 – ING

The Reserve Bank of New Zealand (RBNZ) hiked rates by another 50bp to 2.0% today but delivered a substantial hawkish surprise with its updated rate projections. However, that is a story for the long run, and economists at ING expect NZD/USD to climb towards 0.70 by end-2022

Has the RBNZ gone too far with rate projection?

“The RBNZ signalled a terminal rate around 4.0% in 2023, following a 50bp hike today.”

“The Bank now forecasts the policy rate at 3.25-3.50% by year-end and around 200bp of total tightening by the end of 2023 – therefore signalling a terminal rate around 4.0%. We suspect the rate projections may be too hawkish, but this is a story for the long run: for now, 50bp hikes should keep the NZD on track for a return to 0.70 by year-end.”

“The short-term outlook for NZD (and its ability to consolidate above 0.65) remains strictly tied to swings in global risk sentiment and the Chinese economic outlook, which remains a major source of uncertainty.”