RBNZ: Preemptive hikes and neutral ceiling – TD Securities

FXStreet Insights Team FXStreet

TD Securities’ Prashant Newnaha shifts the Reserve Bank of New Zealand (RBNZ) call to start 25 bps hikes in July rather than September, keeping a total of four moves in the profile. Newnaha highlights RBNZ guidance that the OCR is likely to rise at coming meetings, while stressing a weak growth outlook and a more deeply negative output gap. He prefers receiving New Zealand rates on yield sell-offs, viewing the neutral rate near 3.50% as a ceiling.

RBNZ path pulled forward to July

"We retain 4 x 25bps RBNZ hikes in our cash rate profile, but forecast the hike cycle to commence from July and not September as per our prior forecast."

"None of these conditions were broken supporting a hike ahead of the May meeting and the RBNZ would not have had data to categorically show a breach of these conditions by the July meeting to hike then either."

"Nonetheless, the RBNZ yesterday declared acting preemptively to be the more prudent option."

"The Bank's OCR track is consistent with the first 25bps hike in Jul."

"The Bank's estimate of the nominal neutral rate is 3.50% and this should serve as a ceiling on pricing."

(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 hits eight-month lows below 0.6850 amid bullish USD

AUD/USD stays defensive below 0.6850, hitting an eight-month low in the Asian session on Thursday as the possibility of a steeper Fed rate hike in December helps the US Dollar hold near its highest level since April 2025. Geopolitical uncertainty also supports the safe-haven buck, while the RBA’s cautious, on-hold stance limits the Aussie.

USD/JPY eases from near 160.00 amid looming intervention risks, BoJ hike bets

USD/JPY retreats slightly from an over two-month high as the recent surge back to the 160.00 psychological mark prompted verbal warnings from Japanese authorities and sparked fears of direct FX intervention. Moreover, data showed that Japan’s wholesale inflation picked up again in October, strengthening the case for a BoJ hike in December and lifting the Japanese Yen. However, a bullish US Dollar, bolstered by odds of a jumbo Fed rate hike in December, could cap the pair's downside.

Gold falls below $4,000 as traders weigh a half-point Fed rate hike

Gold (XAU/USD) slips back below $4,000 on Thursday, giving up most of last week’s gains as bets on more aggressive Federal Reserve (Fed) interest rate hikes lift the US Dollar (USD) to a fresh year-to-date high.

MSCI drops Strategy from indexes: What it means for Bitcoin

Strategy and Bitcoin (BTC) came under fresh pressure late Wednesday after MSCI finalized its decision to remove the Bitcoin treasury company from its global indexes, raising concerns about potential selling pressure on MSTR shares and its future Bitcoin purchases.

Why the US Dollar's rally isn't as strong as it looks

The US Dollar Index (DXY) is back at an 18-month high, but most of its climb since August is the Euro falling. Against a wider group of trading partners, the Dollar has gained half as much, and the Federal Reserve has raised rates once this year. The US Dollar Index, which measures the Dollar against six other currencies, is trading near 103.

What the US CPI headline doesn’t tell you about inflation

Brent crude has fallen about a third since mid-October on hopes the Iran war is ending, but diesel, freight and fertiliser costs haven't followed. Those costs reach US consumer prices in stages through 2027 and could keep inflation high after gasoline gets cheaper.