The Reserve Bank of New Zealand left rates unchanged at today's meeting. RBNZ ended its QE programme in July and was expected to begin a rate hike cycle today. However, as New Zealand headed into a fresh nationwide lockdown, central bankers decided to stay on hold and wait to see how the situation develops. Nevertheless, it should be seen more as a brief pause rather than a big shift. Projections released by the RBNZ showed that the Bank still expects at least one 25 basis point rate hike this year followed by 4 rate hikes in 2022 (100 basis points). The New Zealand housing market is running hot and inflation is accelerating therefore RBNZ sooner or later will need to hike rates in order to avoid overheating the economy. Next RBNZ meeting is scheduled for October 3 and should the new Delta variant outbreak be contained quickly, central bankers from New Zealand may push forward with a rate hike then.
RBNZ rate hike looked like a done deal at the start of the week. However, most of the economists revised their expectations following yesterday's lockdown announcement. In turn, today's "hawkish hold" was more or less expected and did not trigger a major move. NZDUSD dropped following the decision announcement but has quickly recouped losses and climbed back above 0.6900 handle. The pair is now trading at the 0.6925 price zone that marks the lower limit of a descending triangle pattern. Breaking below could pave the way for a large downward move with 0.6375 area being a textbook range of the breakout. The pair may enjoy elevated volatility this evening as FOMC minutes are scheduled for release at 7:00 pm BST.
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Source: xStation5
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