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13/08/24
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Dovish RBNZ May Keep AUD Outperforming NZD
On Wednesday, New Zealand’s central bank will issue its quarterly Monetary Policy Statement with new forecasts on monetary policy outlook, inflation, and growth, while also announcing its monetary policy decision.
It is generally expected that the RBNZ will maintain its official cash rate at 5.5% again after it kept the rate paused for the eighth straight time in the meeting in July where it gave its monetary policy statement a dovish tone that noted that the current high interest rates had resulted in economic activities in New Zealand declining.
In the May quarterly Monetary Policy Statement, the RBNZ indicated that the first interest rate cut in New Zealand would likely only be done after Q2 of next year.
Given the latest lackluster data on inflationary and growth trends in New Zealand, the RBNZ will likely relook its monetary policy projection. It may move its first interest rate cut forward to the first half of next year as the core inflation rate in Q2 has fallen from 3.7% recorded in Q1 to 2.8% y/y, the slowest rate of growth in 3 years.
The RBNZ may therefore use the monetary policy meeting on Wednesday to provide guidance and pave the way for an imminent interest cut cycle while keeping its official cash rate unchanged at 5.5%.
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