New Zealand Dollar: Growth headwinds and RBNZ surprise in focus – Rabobank

Inflation is expected to rise to 4.4% in Q4, largely driven by fuel. Despite that outlook, the Reserve Bank of New Zealand (RBNZ) stressed that domestic demand remains subdued. Rabobank's Senior FX Strategist Jane Foley says the unexpected rate hold caught markets positioned for a hike off guard. Only recently out of recession, New Zealand’s economy remains unbalanced, with headwinds from the Iran war offsetting strength earlier in 2026.

New Zealand Dollar responds to RBNZ rate hold

"Last week’s decision by the RBNZ to leave rates unchanged blindsided a market that was priced for a hike. The action has led to some soul searching ahead of this week’s RBA decision."

"The RBNZ commented at its policy meeting, that while annual inflation is expected to increase to 4.4% in the December quarter (largely on the back of fuel), that domestic demand remains subdued."

"The performance of the New Zealand economy has been very different from that of Australia in recent years, with the former only emerging from recession in late 2024 to an unbalanced performance last year."

"Despite some strong green shoots for New Zealand in Q1 2026, this was ahead of the headwinds caused by the Iran war."

"That said, the shock of last week’s RBNZ policy decision has underpinned some concerns over the signals that RBA Governor Bullock may provide this week."

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