RBNZ Hike Falls Short, NZD Dovishly Reprices

The New Zealand Dollar (NZD) underperformed after the Reserve Bank of New Zealand's (RBNZ) decision to raise the Official Cash Rate (OCR) by 25 basis points to 2.75%.

This move was widely expected, but what came as a surprise was the RBNZ's cautionary statement that 'this decision reduces the risk that the OCR needs to increase by more later.'

The central bank also stressed that 'spare capacity remains in the economy, particularly in the labour market,' which suggests that further tightening may not be necessary.

Furthermore, the RBNZ's OCR path projection remained virtually unchanged from May, still peaking at around 3.25% in 2028.