RBNZ holds interest rate unchanged at 5.5% as expected


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

Summary of the RBNZ rate statement

“Committee agreed that interest rates may need to remain at a restrictive level for a more sustained period of time.”

“Committee noted inflation is still expected to decline to within the target band by the second half of 2024.”

“Committee noted inflation is still expected to decline to within the target band by the second half of 2024.”

“Recent indicators show that employment intentions are flat and difficulty in finding labour has reduced.”

“Over the medium term committee agreed downside risks around the outlook for global growth remain.”

Minutes of the RBNZ interest rate meeting

“Interest rates are constraining economic activity and reducing inflationary pressure as required.”

“Demand growth in the economy continues to ease. While GDP growth in the June quarter was stronger than anticipated, the growth outlook remains subdued. With monetary conditions remaining restrictive, spending growth is expected to decline further.”

“Globally, economic growth remains below trend and headline inflation has eased for most of our trading partners. Core inflation has also eased, but to a lesser extent.”

“Weakening global demand is putting downward pressure on New Zealand export volumes and prices. Apart from oil, global import prices have eased. “

“While the imbalance between supply and demand continues to moderate in the New Zealand economy, a prolonged period of subdued activity is required to reduce inflationary pressure.”

“There is a near-term risk that activity and inflation do not slow as much as needed. Over the medium term, a greater slowdown in global economic demand, particularly in China, could weigh more on commodity prices and New Zealand export revenue.”

“The Committee agreed that the OCR needs to stay at a restrictive level to ensure that annual consumer price inflation returns to the 1 to 3% target range and to support maximum sustainable employment.”

NZD/USD reaction to the RBNZ interest rate decision

NZD/USD remains under selling pressure following the RBNZ ’s status quo. The pair currently trades around 0.5873, down 0.60% 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 weakest against the Canadian Dollar.

USD   0.01% 0.01% -0.02% 0.03% -0.02% 0.43% 0.04%
EUR -0.01%   0.01% -0.03% 0.02% 0.00% 0.43% 0.03%
GBP -0.03% -0.03%   -0.04% 0.00% -0.02% 0.37% 0.03%
CAD 0.03% 0.02% 0.03%   0.05% 0.03% 0.37% 0.05%
AUD -0.02% -0.03% -0.04% -0.07%   -0.05% 0.40% 0.02%
JPY 0.00% 0.03% 0.04% -0.02% 0.08%   0.40% 0.03%
NZD -0.35% -0.35% -0.34% -0.36% -0.27% -0.36%   -0.33%
CHF -0.06% -0.05% -0.03% -0.07% -0.05% -0.04% 0.33%  

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 21:15 GMT as a preview of the RBNZ Interest Rate Decision

  • The Reserve Bank of New Zealand is expected to keep the Official Cash Rate unchanged at 5.5% in October.
  • The RBNZ, with little room for surprises, may offer little help to the weak NZD/USD currency pair.
  • The New Zealand Dollar shows a bearish tilt against the US Dollar after being rejected from above 0.6000.

The Reserve Bank of New Zealand (RBNZ) is on track to keep its key interest rate unchanged for the fourth straight time on Wednesday after its Monetary Policy Review. The central bank's tone is expected to remain tilted to the hawkish side. Excluding any surprises in the Official Cash Rate (OCR), the focus will be on policy guidance.

The RBNZ will likely follow the RBA, which kept interest rates unchanged on Tuesday. The New Zealand Dollar (NZD) could remain relatively steady if the central bank delivers as expected.

RBNZ interest rate decision: All you need to know on Wednesday 

  • US stocks closed in negative territory on Tuesday, with the Dow Jones losing 1.29% and the Nasdaq down by 1.87%. Meanwhile, the 10-year US Treasury bond yield reached 4.80% for the first time since 2007.
  • The latest Chinese PMI survey offered mixed signs, indicating some stabilization in economic activity, which is a positive development after the deterioration seen in previous months.
  • The US ISM Manufacturing PMI surpassed expectations, increasing from 47.6 in August to 49 in September, compared to the market consensus of 47.7. The Price Paid component dropped from 48.4 to 43.8. Key US jobs data is due later in the week, with the ADP Private Payroll report on Wednesday and the Nonfarm Payrolls on Friday. Solid US data has been a crucial driver in the ongoing US Dollar rally. 
  • The latest NZIER Quarterly Survey of Business Opinion (QSBO) showed improved Business Confidence in New Zealand, rising from -63 to -52 over the quarter through September, but sentiment remains generally downbeat.
  • Most NZIER's Monetary Policy Shadow Board members recommended that the central bank hold the OCR at 5.50% in the October Monetary Policy Review. Two members recommended a 25 basis point hike.
  • The RBNZ is unlikely to provide significant relief for NZD/USD, as US Dollar dynamics drive its movement in a context of risk aversion and lower commodity prices. 

Reserve Bank of New Zealand interest rate expectations: How will it impact NZD/USD? 

Analysts expect the Reserve Bank of New Zealand to keep the Official Cash Rate at 5.50% at the October Monetary Policy Review. The decision will be published at 01:00 GMT on Wednesday.

Market analysts and the shadow board see the RBNZ keeping rates unchanged. This reflects the expectation that the economy still has to fully experience the impact of past rate hikes.

At the August meeting, the RBNZ mentioned that they agreed that interest rates "need to stay at restrictive levels for the foreseeable future to ensure annual consumer price inflation returns to the 1-3% target range. In the near term, there is a risk that activity and inflation measures do not slow as much as expected."

During the second quarter, Gross Domestic Product (GDP) growth came in stronger than expected, expanding by 0.9%, and the annual rate slowed from 2.2% to 1.8%, less markedly than expected. The Consumer Price Index (CPI) rose 1.1%, and the annual rate dropped from 6.7% to 6%. The RBNZ will likely wait until the following inflation report (due October 16) to consider changing the monetary policy stance. The next meeting of the RBNZ is scheduled for November 28-29, and the central bank will release the quarterly Monetary Policy Statement and hold a press conference, providing a better opportunity to deliver any changes.

According to the interest rate market, the odds of a hike in October are around 10% and rise to more than 50% for the November meeting. This represents a risk for the New Zealand Dollar, considering that if the central bank delivers a message that lowers these expectations, the Kiwi would suffer. On the contrary, it would take a bold hawkish twist to increase those expectations and potentially support the Kiwi. Policymakers have arguments to deliver the message in either way. However, most analysts expect no significant changes. There appears to be little room for surprises. 

Two shadow board members consider that the appropriate approach would be a 25 basis points rate hike, arguing that "upside risks to inflation have appeared more crystallized recently, and the Reserve Bank should increase the OCR sooner rather than later if it still expects to start cutting the OCR later next year." 

The New Zealand Dollar will likely witness volatility around the policy announcement. The NZD/USD has experienced a sharp reversal during the last sessions. On Friday, it reached monthly highs near 0.6050 but then started to decline, falling below 0.6000. More recently, it has slid below the 20-day Simple Moving Average (SMA) and approached the September low that stands around 0.5860, which is a critical support area. A break below 0.5860 would increase the selling pressure, exposing the next support area between 0.5780 and 0.5800.

The New Zealand Dollar needs to post a daily close clearly above 0.6000 against the US Dollar in order to increase the odds of a more robust recovery. While below that level, the pair will likely continue to trade sideways around the 0.5900 mark, with risks tilted to the downside.

Economic Indicator

New Zealand RBNZ Rate Statement

The RBNZ Rate Statement contains the explanations of the decision on interest rates and commentary about the economic conditions that influenced it.

Read more.

Next release: 10/04/2023 01:00:00 GMT

Frequency: Irregular

Source: Reserve Bank of New Zealand

Why it matters to traders

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Adrian Orr’s press conference.

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