RBNZ: Patient hiking path supports New Zealand Dollar – TD Securities

FXStreet Insights Team FXStreet

TD Securities’ Prashant Newnaha says the RBNZ kept the OCR at 2.25% and now signals a first 25 bps hike in late 2026 or early 2027, followed by limited tightening. TD keeps its own OCR path unchanged, with hikes in Q1 and Q2 2027 and another in 2028, while warning risks skew toward earlier and more aggressive normalisation.

RBNZ signals slow, shallow tightening cycle

"The RBNZ kept the Official Cash Rate (OCR) at 2.25% in a unanimous decision. The Bank's updated OCR track now pegs the first 25bps hike to later this year or early next year. However, there is limited urgency to raise the cash rate thereafter with a follow-up 50bps of hikes over the following 2 years."

"Significant excess capacity, subdued wage growth, an economic recovery that is patchy across regions/sectors with inflation expected to decline gradually towards target underwrites the Bank's patient approach to normalising policy. Further, the Bank does not anticipate lifting the cash rate above neutral over its projection horizon to Q1'29."

"We make no changes to our forecast OCR path. We stick with the RBNZ on hold this year, reaffirm our call for 25bps hikes in Q1 and Q2 next year, taking the OCR from 2.25% to 2.75%. We forecast another 25bps hike for 2028."

"Rather than shooting itself in the foot and telegraphing a need to recalibrate policy more quickly to get on top of inflation, the Bank has made it clear that it does not intend to short circuit the economic recovery that the sharp series of rate cuts were delivered to engineer."

"We do acknowledge however, the risk to our call is for the RBNZ to begin hiking earlier and/or more aggressively than we or the Bank forecast. We and the Bank severely underestimated the speed and the depth of the easing cycle initially, so the reverse scenario, underestimating the speed and the magnitude of tightening is entirely plausible as well."

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

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD flirts with 0.7000, lowest since early August amid bullish USD

AUD/USD hits a fresh low since early August during the Asian session on Friday and looks vulnerable near 0.7000 after breaking below the 200-day SMA overnight. Against the backdrop of the hawkish Fed, a two-day rally in oil prices revives inflation fears and continues to push US bond yields to multi-year highs. Adding to this, geopolitical risks lift the US Dollar to a two-month high, overshadowing RBA rate hike bets and weighing on the pair.

USD/JPY pulls back from three-week high after failing near 159.00

USD/JPY edges lower during the Asian session on Friday, stalling its recent strong move to a three-week high of 159.00 as Japanese Yen bears turn cautious amid intervention fears. Meanwhile, the US Dollar retains a strong bullish undertone as the Fed's hawkish outlook and oil-driven inflation fears continue to push US bond yields to multi-year peaks. Furthermore, the BoJ's dovish rate hike last week might cap JPY and support spot prices.

Gold treads water below $4,300

Gold grabs some buying attention and advances marginally at the end of the week, partially retracing the weekly decline, although it is still navigating below the key $4,300 mark per troy ounce. The fresh selling bias on the Greenback and the modest decline in US Treasury yields appear to support the humble advance in the precious metal.

Crypto Today: Bitcoin and Ethereum edge lower, XRP extends recovery as macro headwinds weigh

The broader cryptocurrency market is consolidating on Friday, with Bitcoin paring losses slightly above $84,000. Ethereum declines in tandem with BTC. Ripple (XRP), meanwhile, paints a different picture.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Federal Reserve (Fed) and the Bank of Japan (BoJ) have just done something remarkably similar. Both central banks raised interest rates by 25 basis points (bps) last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.