The RBNZ Overnight Cash Rate went from modern lows of 2.50 percent to 2.75 percent on the hike—matching analysts’ forecasts and Overnight Index Swaps’ implied expectations. In the attached statement, RBNZ Governor Alan Bollard took a relatively hawkish line on macroeconomic growth and potential price pressures. Indeed, he said strong Asian economic growth, continued Australian strength, and “recovery in the United States” offset weakness in other key export markets.
Of perhaps greatest interest to financial markets, Bollard stated that the bank has “as previously signaled, decided to begin removing some of the monetary policy stimulus that is currently in place.” Though he took a fairly circumspect tone and said that future hikes would depend on economic and financial market developments, the optimistic growth outlook implies that we can expect further RBNZ tightening through the medium term.
The New Zealand Dollar rallied noticeably in the moments following the release as speculators chased the higher yields of the antipodean currency.
Written by David Rodríguez, Quantitative Strategist for DailyFX.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.
