The Reserve Bank of New Zealand is set to maintain its Official Cash Rate (OCR) at 5.50% during its upcoming meeting, marking the eighth consecutive meeting with no changes. Despite concerns about the economy, the RBNZ is expected to delay any dovish shifts due to upside risks to inflation.
Market participants are anticipating the RBNZ’s policy announcements to introduce potential delays in any dovish changes, especially after New Zealand’s annual Consumer Price Index (CPI) showed a growth of 4% in the first quarter. Non-tradable inflation remains a concern, even though there have been improvements in disinflation and GDP growth in the first quarter.
The New Zealand Dollar is preparing for increased volatility following the RBNZ decision, with the NZD/USD pair expected to react based on the central bank’s stance on inflation risks and potential policy changes. Analysts suggest that a dovish shift in the RBNZ’s language could push the Kiwi Dollar lower, while maintaining a hawkish view on inflation could propel it towards recent highs.
