ING forecasts a 25bp hike by New Zealand’s central bank next month to curb inflation expectations, though risks grow it may be a one-off move.
The Reserve Bank of New Zealand is expected to raise its policy rate by 25 basis points to 2.50% in July, despite a sharp decline in oil prices. The move is viewed as an ‘insurance’ hike to anchor inflation expectations, mirroring the ECB’s recent decision.
In May, the RBNZ held rates at 2.25% in a split decision, with projections signaling 50-75bp of tightening by end-2026. However, oil price assumptions underpinning those forecasts—$95-105/bbl—have since collapsed to near $65, making earlier inflation projections appear unrealistic.
While the hike is seen as finely balanced, the risk of it being a one-off move is rising, which could limit further support for the New Zealand Dollar.