NZD: A surprise dovish tilt by the RBNZ – ING

The
Reserve
Bank
of
New
Zealand
surprised
markets
with
a
dovish
tilt
in
communication
as
it
kept
rates
on
hold
at
5.50%
overnight,
ING’s
FX
strategist
Francesco
Pesole
notes.

Next
week’s
CPI
report
to
help
reverse
NZD
losses

“The
Bank
displayed
greater
confidence
on
disinflation
in
the
statement,
stating
that
“restrictive
monetary
policy
has
significantly
reduced
consumer
price
inflation”
and
that
the Committee
expects headline
CPI
to
return
to
the
1-3%
target
range
in
the
second
half
of
this
year.
Incidentally,
there
were
multiple
mentions
of
slowdown
in
the
economy
and
the
labour
market.”

“Our
forecasts
included
one
rate
cut
by
the

RBNZ
in
the
fourth
quarter
this
year,
but
we
admit
today’s
statement
tilts
the
balance
towards
at
least
two
(60bp
are
priced
in
by
year-end).
Policymakers
must
have
looked
at
some
convincing
evidence
of
upcoming
disinflation
to
change
their
messaging
today,
but
we
continue
to
see
some
substantial
upside
risks
to
their
non-tradable
inflation
forecasts.”

“An
upside
surprise
at
next
week’s
second
quarter
CPI
report
could
help
reverse
NZD
losses,
and
we
remain
generally
positive
on
NZD
this
summer.”