NZD Dips on Mixed Inflation Expectations, RBNZ Hikes Still Likely

The New Zealand Dollar briefly dipped below its 200-day moving average as mixed but well-anchored inflation expectations survey results were released. The Reserve Bank of New Zealand (RBNZ) Q3 inflation expectations survey showed decreases in one-year-ahead annual CPI inflation and two-year ahead, with increases in five-year-ahead and ten-year ahead.

Elias Haddad from Brown Brothers Harriman notes that the RBNZ policy rate is near the lower-end of neutral. Despite this, he believes there are arguments for additional RBNZ hikes due to above target inflation, stronger domestic growth, and a policy rate near the lower end of neutral.

The swaps curve fully prices in 75 bps of tightening over the next twelve months to 3.25%, which is positive for the NZD.