DBS Group Research’s Philip Wee anticipates that the Reserve Bank of New Zealand (RBNZ) will maintain its current policy stance at the upcoming April 8 meeting, despite a recent spike in headline inflation driven by energy prices [1]. Governor Anna Breman and Chief Economist Paul Conway are expected to look through this energy-driven inflation, opting to keep the official cash rate steady at 2.25% in order to support a soft landing for the economy and avoid premature tightening that could risk a return to recession [1].
However, Governor Breman has signaled conditional hawkishness, indicating a readiness to hike rates if oil disruptions threaten to de-anchor inflation expectations, specifically if core inflation and wage growth move above the RBNZ’s 1-3% target band [1]. This stance introduces a degree of uncertainty, as future policy could shift if inflation expectations rise.
On the currency front, NZD/USD has retraced more than 75% of its prior rally from 0.56 to 0.61, and may find technical support near 0.5630 along a trendline, according to Wee [1]. The potential for a hawkish reaffirmation by Breman could provide tactical support for the NZD/USD pair at this level [1].
CONCLUSION
The RBNZ is expected to keep rates unchanged, prioritizing economic stability despite inflationary pressures. However, conditional hawkishness remains, with the possibility of rate hikes if inflation expectations rise. NZD/USD may find support near 0.5630, reflecting cautious optimism for the currency amid policy uncertainty.