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As expected, the Reserve Bank of New Zealand (RBNZ) kept its Official Cash Rate (OCR) at 5.50% for a seventh consecutive meeting in a row in April.

Overall, RBNZ members agreed that there’s a bit more room to wait for inflation to slow even further. They believe that “A restrictive monetary policy stance remains necessary to further reduce capacity pressures and inflation” while inflation expectations and pricing intentions remain elevated.

Governor Orr will not be giving a presser this time so we can look at the official statement for the central bank’s biases. For starters, RBNZ generally believes that “the balance of risks was little changed since the February Statement.

Link to RBNZ April 2024 Policy Decision press release

Economic growth and business confidence and pricing intentions continued to ease but some indicators are pointing to a modest recovery in activity in Q1 2024. Net migration has declined from its peak but upside revisions to historical data continue to boost consumer spending and housing costs.

Upside inflation risks include increases to local government rates and the persistence of services inflation. Meanwhile, RBNZ’s high interest rates and weaker global growth could lead to “a more rapid decline in inflation than expected.

Easing business and consumer sentiment as well as structural challenges in China – one of New Zealand’s largest trading partners – can also lead to easing inflation pressures.

Market Reactions

New Zealand Dollar vs. Major Currencies: 5-min

Overlay of NZD vs. Major Currencies 5-min Forex

Overlay of NZD vs. Major Currencies 5-min Forex Chart by TradingView

Expectations of a “hawkish hold” from the RBNZ and leftover strength from the anti-USD sentiment in the previous U.S. session started NZD’s day on a strong note.

The currency gave up its early Asian session gains, however, as some traders took profits ahead of RBNZ’s event.

NZD spiked higher across the board at the RBNZ’s statement but saw a buy-the-rumor, sell-the-news situation in the first 10 minutes of the release.

The comdoll eventually went back to its session highs and looks set to make new daily highs as more traders digest the RBNZ talking about its “tolerance to increase the time to achieve the inflation target” and sticking to its preference for restrictive policies…for now.

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