Anna 
In a recent announcement, the Reserve Bank of New Zealand (RBNZ) has opted to keep the official cash rate (OCR) unchanged, but the central bank’s forward guidance suggests a potential rate hike in the first half of 2024. Analysts at ANZ Bank delve into the implications of this new trajectory on the New Zealand dollar (NZD).
The RBNZ’s communicated path indicates a technical possibility of a rate hike in the initial months of 2024. This projection stands in contrast to the current market consensus, which is still leaning towards a rate cut before May, albeit seen as less likely. ANZ Bank analysts identify a potential upside risk to rates based on the RBNZ’s indications. However, they caution against overstating this theme, recognizing the tendency of markets to anticipate RBNZ moves while being influenced by global sentiment. The prevalent global sentiment has centered around the expectation of the central bank completing rate cuts in 2024.
ANZ Bank’s analysis of the RBNZ’s overall forecasts takes into account key factors, including a 25 basis points increase in the bank’s estimate of the neutral OCR. This adjustment suggests that the RBNZ holds genuine concerns about the economy potentially entering a premature recession. Against this backdrop, the second spring is highlighted as a period carrying risks but likely to provide support to interest rates and the New Zealand dollar.
As the economic landscape evolves, the RBNZ’s signaling of a potential rate hike in 2024 introduces a dynamic element to the market’s expectations. ANZ Bank emphasizes the need for a nuanced approach, considering both the RBNZ’s guidance and the broader global sentiment that often shapes market movements. The second spring is identified as a crucial period, where the interplay of various factors is expected to impact interest rates and contribute to the overall trajectory of the New Zealand dollar. Investors and market participants will closely monitor developments, weighing the implications of the RBNZ’s stance on the future movements of the NZD in the coming months.
