ING’s Francesco Pesole anticipates that the Reserve Bank of New Zealand (RBNZ) will raise its policy rate by 25 basis points to 2.75%, with the announcement scheduled for 0300 BST. This move is fully priced in by markets, and consensus among analysts is unanimous regarding the expected hike [1]. However, the market’s focus is shifting to the RBNZ’s forward guidance and updated economic projections, as current market pricing anticipates an additional 95 basis points of tightening by June 2027. Pesole argues that this expectation appears overly hawkish unless the RBNZ significantly revises its rate path higher, which currently only includes one more 25 basis point hike over the next three quarters [1].
ING expects the RBNZ to deliver softer CPI projections, citing the influence of lower oil prices. This dovish tilt could disappoint market participants who are positioned for a more aggressive tightening stance. As a result, ING forecasts that NZD/USD could slip back below 0.5900 in the near term, especially if the RBNZ fails to meet hawkish market expectations and the US dollar finds renewed support [1].
Overall, the market reaction to the RBNZ decision is likely to hinge on the tone of the central bank’s statement and the extent of any revisions to its rate and economic outlook. Downside risks for the New Zealand dollar are highlighted, with ING suggesting that the currency could weaken if the RBNZ underwhelms on hawkish guidance [1].
CONCLUSION
The RBNZ is widely expected to raise rates by 25 basis points, but ING sees downside risks for the New Zealand dollar if the central bank’s guidance is less hawkish than markets anticipate. Softer CPI projections and limited further tightening could lead to NZD/USD trading below 0.5900 in the near term.