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22/05/24
242
NZD Higher After Hawkish Announcement By RBNZ
On Wednesday the New Zealand dollar was higher and NZD/USD traded at about 0.6124, up 0.54% in the European session. In the Asian session, the New Zealand dollar lifted to 0.6152 (0.80%) after the RBNZ meeting but has trimmed some of these gains.
The Reserve Bank of New Zealand kept the cash rate at 5.5% at the meeting today, as expected. This was the 7th consecutive time that the RBNZ has kept rates unchanged, as it maintains its rate policy of “higher for longer”.
The monetary policy statement was very hawkish, and this boosted the New Zealand dollar. According to the statement, rates may have to stay at a restrictive level for longer than expected.
The language was unexpectedly hawkish and indicated the RBNZ’s frustration at inflation’s slow drop. Although New Zealand’s inflation rate has declined sharply, the Q1 number of 4% was higher than the central bank’s forecast of 3.8%.
Although the RBNZ’s rate-tightening cycle has curbed inflation, it is still at twice the midpoint of the target range of between 1% and 3%.
The RBNZ has extended its forecast that CPI would fall to within the target range of 1-3% from Q3 to Q4 of this year.
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