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09/07/24
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NZD Inches Down Before RBNZ Decision
On Tuesday, the New Zealand dollar was steady, and NZD/USD traded at about 0.6115, down 0.16% for the day in the European session. The New Zealand dollar gained against the slumping US dollar last week and climbed 0.88%.
It is expected the Reserve Bank of New Zealand will keep the cash rate at 5.50% for the eighth consecutive time at its meeting on Wednesday. Despite the worsening economic downturn, the RBNZ has not been willing to move from its ‘higher for longer’ stance.
The manufacturing and services sectors are both in contraction and business and consumer confidence has been weak. In the first quarter, the economy only posted 0.3% annual growth after two quarters of contraction.
Although the weak New Zealand economy needs a rate cut badly to restart growth, the RBNZ’s top priority is to push inflation back down to the target band of between 1% and 3%. In the first quarter, inflation eased to 4.0% from 4.7%.
With a rate hold generally expected on Wednesday, the focus will be on the rate statement’s tone. At the May meeting, the RBNZ forecast that it wouldn’t lower rates until Q3 of next year, and as the economy may have worsened since then, it could delay a rate cut even more.
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