RBNZ Hike Expected, But Hawkish Risks Loom Large

ING's Francesco Pesole is predicting that the Reserve Bank of New Zealand (RBNZ) will raise interest rates by 25 basis points to 2.75% in its upcoming decision.

This move, expected on [the announcement date of] 0300 BST, has already been priced into the market, leaving the impact on the New Zealand dollar dependent on the RBNZ's guidance and rate projections.

Pesole argues that current market expectations for further tightening are too hawkish, unless the RBNZ significantly lifts its rate path. He expects softer CPI projections due to declining oil prices.

As a result, ING anticipates the NZD/USD exchange rate will slip back below 0.5900 in the near term if the RBNZ underwhelms hawkish expectations and the US dollar finds support.