RBNZ Hike Expected, but Dovish Risks May Cap NZD Gains
The Reserve Bank of New Zealand (RBNZ) is set to raise its official cash rate at its upcoming meeting, but analysts at ING warn that dovish risks could limit any sustained strength in the New Zealand Dollar.
A 25-basis-point hike is fully priced in for the RBNZ's meeting scheduled for next week, bringing the OCR to [Current rate + 0.25%]%. However, ING's note highlights that the central bank's forward guidance and economic projections will be crucial in determining the NZD's trajectory.
The RBNZ has been one of the more aggressive central banks in the developed world, having already raised rates several times this cycle to combat inflation. Yet, recent domestic data has shown signs of cooling, with GDP contracting in the second quarter and inflation pressures beginning to ease.