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May 25 - 09:55 AM

NZD: A Hawkish Surprise From RBNZ - MUFG

By eFXdata  —  May 25 - 09:26 AM

MUFG Research discusses its reaction to the RBNZ May policy decision.

"While the RBNZ raised rates in line with consensus expectations by 50bps to 2.00%, the main hawkish surprise was provided by the updated forward rate guidance. The RBNZ’s updated projections for the key policy rate revealed that they plan to deliver another 200bps of hikes by 2H 2023 which would lift the policy rate well above their estimate of the neutral rate which is currently at around 2.00%. It leaves open the possibility of further 50bps hikes at upcoming policy meetings. The RBNZ then sees rates peaking at around 4.00% before falling in mid2024," MUFG notes. 

"The update guidance sends a clear signal that the RBNZ has a strong commitment to move policy well into restrictive territory to slow demand sufficiently to dampen elevated inflation pressures. The policy signal will be initially welcomed amongst FX market participants as it should help to dampen inflation expectations and raise nominal yields on offer in New Zealand which both will lift real yields," MUFG adds.

MUFG Research/Market Commentary


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