RBNZ: One last time? - Commerzbank

Tomorrow morning at 3 a.m. BST, the Reserve Bank of New Zealand (RBNZ) will announce its interest rate decision, and most analysts, including myself, expect a cut to 3%. The market has already priced in this move at over 90%. If the decision is as expected, it should come as no surprise and therefore have little impact on the New Zealand Dollar (NZD), Commerzbank's FX analyst Volkmar Baur notes.

RBNZ meeting might provide some support for the Kiwi

"Instead, it will once again depend on how the RBNZ comments on its future interest rate policy. Unlike other central banks, the RBNZ started cutting interest rates early and has done so aggressively. Since last August, interest rates have already fallen by 225 basis points, with the central bank also implementing three 50 basis point cuts."

"However, as inflation has recently shown signs of picking up again and the labour market and economic sentiment have improved, I would expect the central bank to sound much more hawkish this time around, after coming across as rather dovish even at its last meeting in early July."

"The market is still pricing in another interest rate cut (in addition to tomorrow's) and, according to Bloomberg, most economists also see the end of the cycle at 2.75% towards the middle of next year. I, on the other hand, assume that 3% will be the end of the line. If the RBNZ gives initial indications tomorrow that it is thinking along similar lines, this should provide some support for the Kiwi."