The New Zealand dollar has extended its gains on Wednesday and is higher for a third straight day. In the North American session, NZD/USD is trading at 0.6074, up 0.24%.
RBNZ Holds Rates, Says Economy Weak
There was little drama from the Reserve Bank of New Zealand’s meeting on Wednesday, as the decision to pause was widely expected. The RBNZ has now kept the cash rate unchanged at 5.5% for six straight times.
There really wasn’t much for investors to digest from today’s meeting. The rate statement was only 140 words and there was no follow-up press conference from Governor Orr. The takeaway message from the statement was that the RBNZ was confident that keeping the cash rate in restrictive territory would bring inflation within the 1-3% target band by the end of the year. This clearly was not market-moving news and the New Zealand dollar is showing little movement today.
The RBNZ statement made sure to mention that “economic growth in New Zealand remains weak”, but that was the only hint at a possible cut in rates. It’s a guessing game as to when the central bank will start lowering rates but a move before October appears unlikely.
What is certain is that the RBNZ will want to see more data before making a shift in policy, and next week’s fourth-quarter inflation release will be a key factor in rate policy. Inflation in Q4 was 4.7%, more than double the midpoint of the target band. If inflation remains persistently high, the RBNZ might delay rate cuts until 2025.
NZD/USD Technical
- NZD/USD is testing resistance at 0.6060. Above, there is resistance at 0.6107
- 0.6000 and 0.5953 are providing support