ING’s Chris Turner anticipates that the Reserve Bank of New Zealand (RBNZ) will keep its policy rate unchanged at 2.25% during its upcoming meeting, with no new forecasts and limited guidance provided to the market [1]. The consensus among market participants is that very little tightening is expected in the first half of the year, with only 65 basis points of hikes priced in by the end of the year [1]. RBNZ Governor Anna Breman has maintained a dovish tone in her communications, reinforcing expectations for unchanged rates and minimal direction on future tightening [1].
The New Zealand Dollar (NZD) has notably underperformed the Australian Dollar (AUD) this year, attributed to weaker commodity support in New Zealand compared to Australia [1]. Unless the RBNZ delivers a hawkish surprise at its press conference, ING expects this trend of NZD underperformance relative to AUD to persist [1].
Market implications suggest that the RBNZ meeting is unlikely to provide a lift for the New Zealand dollar, given the dovish stance and lack of new forecasts or guidance [1].
CONCLUSION
The Reserve Bank of New Zealand is expected to maintain its dovish approach and keep rates unchanged at 2.25%, offering little support for the New Zealand dollar. Unless a hawkish surprise emerges, NZD is likely to continue underperforming the AUD, reflecting subdued market sentiment and limited tightening expectations.