The New Zealand dollar fell after the Reserve Bank of New Zealand (RBNZ) held its benchmark rate at 2.75% on Oct. 28, with a divided committee resisting a hike despite above-target inflation.
The RBNZ’s Monetary Policy Committee voted four to three to keep the Official Cash Rate (OCR) unchanged; three members favored a 25-basis-point increase to 3%. Reuters reported that 22 of 27 economists in its poll had expected a hike. Reuters dispatches differed on the currency’s intraday decline: one reported a fall of as much as 1.3% to US$0.5609 per New Zealand dollar, while another reported a 1.7% drop to US$0.55831. Investing.com data cited in EconoTimes’ earlier coverage of the currency’s Oct. 23 close put it at US$0.5697 that day.
Annual consumer price inflation was 3.7% in the September quarter, down from 4.1% in June. The RBNZ forecast inflation would reach 4.4% in the December quarter, largely reflecting fuel futures prices. It said the New Zealand dollar’s trade-weighted index had declined about 3% since its September policy statement, while higher fuel prices and currency depreciation could add to inflation pressure.
Members favoring a pause wanted more time to assess the effects of two recent OCR increases, citing subdued wage growth and stable medium-term inflation expectations. The three who backed a hike pointed to core inflation near the top of the target band and the possibility that price pressures could become entrenched. The RBNZ said tighter policy would probably be needed, subject to the economic outlook, and information over the next six weeks could shift the appropriate stance in either direction.
The bank said export-exposed sectors were benefiting from high commodity prices, goods exports and tourism, while domestic demand remained subdued. FXStreet identified US$0.5564 as a downside level for the New Zealand dollar. The RBNZ’s next OCR decision is scheduled for Dec. 9.
