The Reserve Bank of New Zealand (RBNZ) kept interest rates on hold at 5.50% for the eighth consecutive month in a row this July as expected.
Their official statement indicated that their restrictive monetary policy has reduced price pressures enough for the Committee to project a return to the 1-3% annual inflation target later this year.
Furthermore, they explained that falling domestic inflation and lower prices of imported goods have contributed to declining consumer price levels. In addition, they noted that employment growth is easing due to a growing labor force and cautious hiring by companies.
Link to RBNZ monetary policy statement for July 2024
The summary of their discussions also revealed that policymakers agreed that policy needs to remain restrictive but that the “extent of this restraint will be tempered over time consistent with the expected decline in inflation pressure.”
Market Reaction
New Zealand vs. Major Currencies: 5-min
Overlay of USD vs. Major Currencies Chart by TradingView
The Kiwi had been treading carefully in the hours leading up to the official RBNZ announcement before tanking against its major counterparts on the “dovish hold” decision.
Although the central bank maintained the current OCR level, traders likely paid closer attention to the changes in their rhetoric, most of which reflected economic concerns and signaled an openness to ease if domestic growth and inflation continue to soften.
NZD continued its slump close to an hour after the actual statement, before leveling off and edging slightly higher into consolidation until the first half of the Asian trading session.