Reserve Bank of New Zealand hikes rates 25 basis points

The big news just now was from New Zealand. The RBNZ is clearly signalling another hike by September, plus one more after that by the end of the year. We are expecing 2 25bps hikes by the end of the year, one in each quarter.  If anything, the tone of today’s statement increases the likelihood of the RBNZ hiking in July, rather than September. The tone of the statement was very much in line with our market expectations. The RBNZ did not change its forecast of 90-day interest rates, because recent positive surprises (such as strong net immigration) balanced recent negative surprises (such as falling dairy export prices). The RBNZ’s economic forecasts are anticipating very strong GDP growth and slowly rising inflation.

In the chart, you can see the market reaction of the NZDUSD on both the interest rate decision and the bullish comments from the RBNZ.