The Reserve Bank of New Zealand announces its monetary policy decision at 02:00 GMT on Wednesday (RBNZ). Despite the paucity of economic projection statements, today’s monetary policy meeting becomes crucial amid widespread speculation that New Zealand’s central bank may raise rates in 2021.
It’s worth noting that the RBNZ officials have been quiet recently, and the covid fears are less serious than those of its Pacific peers, making it a good candidate to be the first major central bank to raise rates.
Despite this, market expectations for today’s monetary policy meeting are for no change in the benchmark interest rate, which is now at 0.25 percent, or the Large Scale Asset Purchases (LSAP). However, in the forward guidance, the line “current levels of stimulus will remain in place for a considerable time” should be changed to “current levels of stimulus will remain in place for a considerable time.”
Australia and New Zealand Banking Group (ANZ) said ahead of the event,
Since the RBNZ’s May Monetary Policy Statement, the market has swung dramatically and is now betting that the OCR will rise before the end of the year. The move came amid radio quiet from the Reserve Bank of New Zealand, so all eyes will be on the Review discussion at 2 p.m. Because no predictions have been released, the RBNZ is under no obligation to be specific about when hikes will begin. With CPI data arriving on Friday and important Q2 labor market statistics due in three weeks, we doubt they’ll want to be.
TD Securities has also joined the bull’s league, stating,
We anticipate the RBNZ stating that the data outputs have exceeded expectations. The Bank might back away from comments about price increases being temporary and instead suggest that price pressures could become persistent, although it may prefer to wait until the Q2 CPI data is out on July 16th before making a statement in August.
NZD/USD reverses a two-day downtrend, picking up bids to re-establish an intraday high at 0.6960, up 0.17 percent on the day, ahead of the RBNZ’s release in the Asian session on Wednesday. The New Zealand central bankers’ bullish predictions appear to have paved the way for the kiwi pair’s recent increase in the midst of sluggish markets. Covid difficulties in Asia-Pacific, as well as reflation concerns, which have recently been backed up by US Consumer Price Index (CPI) data, pose a threat to the pair’s purchasers.
If the RBNZ adopts a hawkish tone, the New Zealand dollar (NZD) is poised to profit. The wide strength of the US dollar, on the other hand, may continue to poke the NZD/USD bulls until the RBNZ issues a clear indication of a rate hike and/or tapering, both of which are unlikely to be revealed during today’s monetary policy meeting.
As a result of the RBNZ’s optimistic pronouncements, NZD/USD prices may prolong their recent corrective drop, but downside risks remain due to broad US dollar strength.
Dhwani Mehta of FXStreet said ahead of the release, “The fate of the kiwi is dependent on the price action of the US dollar, particularly in light of the US CPI data, which will be released before of the RBNZ statement. Even if US inflation data disappoints, the greenback is expected to maintain its status as a safe-haven asset as the Delta covid variation spreads over both sides of the Atlantic.”
The NZD/USD bears are in command ahead of the RBNZ meeting.
RBNZ Preview: Is the Bank of New Zealand preparing for monetary policy normalization?
The Reserve Bank of New Zealand announces its interest rate decision. It is beneficial, or bullish, for the NZD if the RBNZ is hawkish about the economy’s inflationary prospects and rises interest rates. The RBNZ rate statement offers explanations for their interest rate decisions as well as commentary on the economic factors that impacted them./n
