New Zealand Dollar: Why Is RBNZ Delaying Hikes as Inflation Mounts? – Standard Chartered

The New Zealand dollar came under pressure after the RBNZ unexpectedly left its OCR at 2.75% in a narrow 4-3 vote, even as it signalled that further tightening remained likely, according to Standard Chartered’s Bader Al Sarraf and Nicholas Chia. Rather than marking the end of the rate-hiking cycle, the bank sees the pause as a postponement. It forecasts 25bp increases in December and February, taking the OCR to 3.25%, and sees scope for another hike in March should domestic inflation remain persistent.

What does the RBNZ’s surprise hold mean for the NZD outlook?

"The Reserve Bank of New Zealand (RBNZ) held the official cash rate (OCR) at 2.75%, contrary to our forecast of a 25bps hike."

"The 4-3 vote implies the decision was less dovish than the headline suggests: three members favoured a hike, while all seven agreed that further policy tightening was likely required, conditional on the outlook."

"Overall, we believe that the RBNZ chose to defer policy hikes rather than call an end to the cycle."

"We now see 25bps hikes each in December and February, which revises our OCR forecast to 3.25% as of end-2027; we previously expected a hold and OCR at 3.00%."

"We see risk of an additional hike in March if domestic inflation proves more persistent than we expect."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)