NZD Gains as RBNZ Shows Optimism for New Zealand Economy

The New Zealand dollar jumped today after the Reserve Bank of New Zealand maintained its interest rates yesterday and signaled that the good health of the nation’s economy can lead to higher rates in the future.

The RBNZ held the Official Cash Rate (OCR) unchanged at 2.5 percent yesterday. The central bank explained that “the New Zealand economy has performed relatively well”. Yet the outlook for the global economy, including the markets of the main nation’s trading partners, “has deteriorated markedly”. The RBNZ voiced concern about the strength of the nation’s currency:

Largely because the New Zealand economy has been doing better than many others, the New Zealand dollar has appreciated since the June Statement. The high level of the New Zealand dollar is having a dampening influence on some parts of the tradable sector and on imported inflation.

The bank predicted that the inflation will stay above the bank’s target range of 1 to 3 percent, but over time the growth of the consumer prices will slow. In the end, the RBNZ signaled that higher interest rates are possible in the future:

If recent global developments have only a mild impact on the New Zealand economy, it is likely that the OCR will need to increase.

NZD/USD climbed from 0.8235 to 0.8307 as of 18:16 GMT today. EUR/NZD fell from 1.6833 to 1.6578, while NZD/JPY jumped from 63.13 to 63.85.

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