Early tomorrow morning (European time), the Reserve Bank of New Zealand (RBNZ) will announce its decision on interest rates. All of the economists surveyed by Bloomberg expect a rate cut, with the vast majority predicting a reduction of 25 basis points, Commerzbank’s FX analyst Michael Pfister notes.
RBNZ to make minor adjustments to its forecast for the key interest rate
“Although inflation was slightly higher than expected in the first quarter, it remains within an acceptable range. The weak real economy provides no reason for real interest rates to remain restrictive. While the unemployment rate remained unchanged at 5.1% in the first quarter, this was only possible due to a lower participation rate. In addition, wage growth continued to slow.”
“Things are likely to become particularly interesting regarding the new forecasts. The global turmoil triggered by Trump’s tariffs is unlikely to bypass New Zealand, dampening growth prospects. However, following tomorrow’s interest rate cut, the key interest rate will probably have reached a level at which the RBNZ will proceed more cautiously after lowering it significantly in recent months.”
“We therefore believe that the RBNZ will only make minor adjustments to its forecast for the key interest rate, which would ultimately result in a neutral decision for the New Zealand dollar.”
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