Markets price nearly four 25 bps hikes by the RBNZ over the next year, but mixed signals weigh on the New Zealand Dollar.
The Reserve Bank of New Zealand is widely expected to hike rates by 25 basis points to 2.5% at its July 8 meeting, aligning with consensus forecasts. However, mixed views from the NZ shadow board and moderating inflation due to falling oil prices have introduced uncertainty about the central bank’s resolve to tighten further.
Market-implied rates suggest nearly four additional 25 bps hikes over the next year, bringing the policy rate to around 3.18%. Despite this, the NZD has underperformed, ranking second-to-last among G10 currencies in recent sessions. RBNZ Governor Breman previously signaled further hikes to curb inflation, but declining oil prices may ease pressure.
Rabobank expects limited upside for the NZD, forecasting choppy NZD/USD trading ranges as markets assess the RBNZ’s policy path and inflation dynamics.