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21/05/24
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NZD Flat Before Rate Announcement By RBNZ
On Tuesday, the New Zealand dollar was nearly unchanged, and NZD/USD traded at about 0.6102, down 0.06% in the European session.
The Reserve Bank of New Zealand has been patient and has kept the cash rate at 4.35% for 6 consecutive times. It is expected the central bank will maintain rates again at the meeting on Wednesday as inflation has stayed persistently high.
Inflation has been dropping and fell to 4% in Q1, down from 4.7% in Q4 of last year. This is however still twice the midpoint of the target range of between 1% and 3% and is too high for the RBNZ to start cutting in the short term.
Economic data for Q1 was soft which should lead to disinflation. The unemployment rate in the first quarter lifted to 4.3%, private wage growth dropped and GDP declined by 0.1% q/q.
Previously, the RBNZ was mandated to maintain low inflation and full employment, while currently, the central bank’s mandate is limited to inflation in Dec. The focus of the central bank when it determines its rate policy will be the strength and wage growth and the labor market.
The Fed is still cautious about cutting rates. Fed Vice Chair Philip Jefferson said on Monday that it was too soon to determine if inflation’s downtrend would last long.
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