The RBNZ did not cut rates but it certainly sounded dovish. The central bank removed the “need for higher rates†from its statement. Has the tightening cycle officially ended?
NZD/USD is trading under 0.74 and hit a low of 0.7370 so far.
Despite the recent falls in NZD/USD, the central bank still complains about the “unjustifiable†value of the NZ dollar. Inflation is expected to gradually move towards 2%.
The RBNZ was expected to express some worries on falling inflation after the negative quarterly CPI level we have seen last week.
Wheeler and his colleagues raised the rates 4 times in 2014 from 2.50% to 3.50%, but then hinted about a pause in the tightening cycle back in July. Since then, the fall in oil prices has weighed on inflation, and many expected more dovish rhetoric.
However, this kind of statement beat dovish predictions.
NZD/USD traded around 0.7440 before the publication.
Apart from lower inflation, the New Zealand economy is doing quite well, with rising employment and recovering milk prices.
Earlier, the US Federal Reserve maintained the key points of the statement. After a lack of response from markets, the dollar eventually began gaining against the others.
