RBNZ keeps interest rate steady at 5.5% as expected


The Reserve Bank of New Zealand (RBNZ) board members decided to hold the Official Cash Rate (OCR) unchanged at 5.5%, as widely expected in its November monetary policy meeting.

Summary of the RBNZ interest rate statement

Interest rates are restricting spending in the economy and consumer price inflation is declining, as is necessary to meet the Committee’s Remit. However, inflation remains too high, and the Committee remains wary of ongoing inflationary pressures. 

Demand growth has eased, but by less than anticipated over the first half of 2023 in part due to strong population growth.

The OCR will need to stay restrictive, so demand growth remains subdued, and inflation returns to the 1 to 3 percent target range. 

If inflationary pressures were to be stronger than anticipated, the OCR would likely need to increase further.

The OCR will need to stay restrictive, so demand growth remains subdued, and inflation returns to the 1 to 3 percent target range.

Minutes of the RBNZ interest rate meeting

Committee agreed that interest rates will need to remain at a restrictive level for longer.

Members agreed they remain confident that monetary policy is restricting demand.

Ongoing excess demand and inflationary pressures were of concern, given high core inflation.

Members discussed the possibility of the need for increases to the OCR.

Members agreed that with interest rates already restrictive, it was appropriate to wait for further data and information.

Members agreed that monetary policy was supportive of sustainable house prices.

Pressure in the labour market is easing, although employment remains above its maximum sustainable level.

Members also noted that most major central banks have indicated that they intend to retain current restrictive policy rates for longer, and are willing to tighten further, if required.

While growth in parts of the economy is slowing, there has been less of a decline in aggregate demand growth than expected earlier in the year.

Committee noted that the estimate of the long-run nominal neutral OCR has increased by 25 basis points to 2.50%.

NZD/USD reaction to the RBNZ interest rate decision

NZD/USD attracts some buyers following the RBNZ ’s status quo. The pair currently trades around 0.6195, up 1.05% on the day. 

New Zealand Dollar price today

The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the strongest against the US Dollar.

USD   -0.08% -0.12% -0.14% -0.16% -0.16% -0.78% -0.09%
EUR 0.09%   -0.02% -0.06% -0.08% -0.08% -0.71% -0.01%
GBP 0.11% 0.02%   -0.03% -0.06% -0.04% -0.70% 0.02%
CAD 0.14% 0.06% 0.03%   -0.01% -0.03% -0.64% 0.04%
AUD 0.15% 0.06% 0.04% -0.01%   0.00% -0.63% 0.06%
JPY 0.17% 0.06% 0.04% -0.01% 0.04%   -0.57% 0.06%
NZD 0.80% 0.68% 0.66% 0.63% 0.62% 0.61%   0.68%
CHF 0.09% 0.00% -0.02% -0.05% -0.05% -0.06% -0.69%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

This section below was published at 20:15 GMT as a preview of the RBNZ Interest Rate Decision


  • The Reserve Bank of New Zealand is set to hold Official Cash Rate steady at 5.50% in November.
  • RBNZ Governor Orr’s press conference and updated macro forecasts could cause volatility.
  • The New Zealand Dollar is more likely to be impacted by Orr’s words than the RBNZ decision.

The Reserve Bank of New Zealand (RBNZ) is set to leave the Official Cash Rate (OCR) unchanged at 5.50%, following its monetary policy meeting on Wednesday. New Zealand’s central bank will likely keep the interest rate on hold for the fifth straight meeting while retaining its hawkish bias.

The New Zealand Dollar (NZD) is subject to extreme volatility should the RBNZ offer any surprises in the language of its Monetary Policy Statement.

What to expect from the RBNZ interest rate decision?

With a steady interest rate decision by the Reserve Bank of New Zealand fully baked in, markets are expected to focus on the central bank’s updated economic forecasts and Governor Adrian Orr’s press conference. The decision will be announced at 01:00 GMT on Wednesday, followed by the presser at 02:00 GMT.

In the Minutes of its October policy meeting, the RBNZ said that “interest rates are constraining economic activity and reducing inflationary pressure as required.” Meanwhile, the policy statement said that the “Committee agreed that interest rates may need to remain at a restrictive level for a more sustained period of time.”

Following the October policy announcement, the official data from Statistics New Zealand (Stats NZ) showed that the Consumer Price Index (CPI) in the 12 months to September rose 5.6%, lower than expectations of 5.9% and the prior quarter’s reading of 6.0%. On a quarterly basis, New Zealand’s inflation increased to 1.8% but fell short of expectations of 2.0%.

The latest labor market report showed that New Zealand's Unemployment Rate climbed to 3.9% in the September quarter, compared with 3.6% last quarter, 

Cooling inflation and loosening labor market conditions justify the potential status-quo stance by the central bank, although it remains to be seen if the RBNZ maintains the hawkish rhetoric, as the recent data added signs that the central bank has come to the end of its tightening cycle. 

On Monday, the New Zealand Institute of Economic Research’s (NZIER) 'Shadow Board' recommended to leave the cash rate at 5.50%. The Shadow Board said, “some members considered that recent developments in inflation and the labor market, along with the waves of mortgage refixing, provide the Reserve Bank with some comfort that the OCR increases to date would be enough to contain inflation back towards its 1 to 3 percent inflation target band.“

Markets are expecting no changes to the RBNZ’s OCR track in its updated forecasts. The October monetary policy review (MPR) showed that the RBNZ continued to forecast the OCR to remain at 5.50% with around a 40% chance of a further 25 basis point hike to 5.75% in 2024. The track indicated that the central bank does not expect to cut until the first half of 2025.

However, Bloomberg’s “World Interest Rate Probabilities (WIRP) suggests 5.0% odds of a hike February 28. After that, it’s all about the rate cuts and the first one is fully priced in for August 14,” analysts at BBH noted.

How will the RBNZ interest decision impact the New Zealand Dollar?

Should the RBNZ forecasts fan any premature expectations of interest rate cuts in the second half of 2024 while suggesting that the Bank is done with its rate hiking cycle, the New Zealand Dollar is likely to come under intense selling pressure against the US Dollar.

At the time of writing, NZD/USD is sitting at a fresh three-month high above 0.6100. In case of a dovish RBNZ pause, the Kiwi pair could see a sharp corrective downside toward the 0.6000 level.

On the other hand, if RBNZ Governor Orr manages to convince markets that one more interest rate hike remains in the offing, the ongoing uptrend in the NZD/USD pair could gain extra legs, with buyers aiming for the 0.6200 threshold.

The New Zealand Dollar, however, could remain supported on a potential hawkish surprise, in case New Zealand’s new coalition government abandons the central bank’s dual mandate, only focusing on price stability. 

Dhwani Mehta, FXStreet’s Senior Analyst, offers a brief technical outlook for trading the New Zealand Dollar on the RBNZ policy announcements: “The NZD/USD pair looks to extend the uptrend, having closed Monday above the critical 200-day Simple Moving Average (SMA) at 0.6090. The 14-day Relative Strength Index (RSI) indicator is sitting beneath the overbought territory while comfortably above the midline, suggesting that there is room for more upside.”

“The next upside hurdle is seen at the 0.6200 round level, above which the July 27 high of 0.6274 will come into play. NZD buyers will then aim for the 0.6300 figure. On the flip side, a sharp sell-off below the 200-day SMA could put the 0.6000 mark at risk. Further down, the confluence of the November 22 low and the 100-day SMA near 0.5995 could emerge as a powerful support for NZD/USD,” Dhwani adds.  


What is the Reserve Bank of New Zealand?

The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are achieving and maintaining price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the band of between 1% and 3% – and supporting maximum sustainable employment.

How does the Reserve Bank of New Zealand’s monetary policy influence the New Zealand Dollar?

The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decides the appropriate level of the Official Cash Rate (OCR) according to its objectives. When inflation is above target, the bank will attempt to tame it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken NZD.

Why does the Reserve Bank of New Zealand care about employment?

Employment is important for the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration in inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says.

What is Quantitative Easing (QE)?

In extreme situations, the Reserve Bank of New Zealand (RBNZ) can enact a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to buy assets – usually government or corporate bonds – from banks and other financial institutions with the aim to increase the domestic money supply and spur economic activity. QE usually results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the objectives of the central bank. The RBNZ used it during the Covid-19 pandemic.

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