RBNZ raises OCR by 50 bps to 2.5%, NZD/USD unfazed

At its July 13 monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) announced a 50 bps increase to the Official Cash Rate (OCR), raising it from 2% to 2.5%, as widely expected.

RBNZ said: “The Committee agreed it remains appropriate to continue to tighten monetary conditions at pace to maintain price stability and support maximum sustainable employment.”

Additional takeaways

A majority of the economists forecast the RBNZ raising rates by 50 basis points to 2.50% at its July 13 meeting while expecting the OCR to reach 3.50% or higher by the end of this year.

Market reaction

With an initial reaction to the RBNZ announcement, NZD/USD remains unchanged at around 0.6130. At the time of writing, the kiwi drops 0.33% to 0.6115, in a delayed response to the outcome.

Why the RBNZ rate decision matters to traders?

The Reserve Bank of New Zealand (RBNZ) holds monetary policy meetings seven times a year, announcing their decision on interest rates and the economic assessments that influenced their decision. The central bank offers clues on the economic outlook and future policy path, which are of high relevance for the NZD valuation. Positive economic developments and upbeat outlook could lead the RBNZ to tighten the policy by hiking interest rates, which tends to be NZD bullish. The policy announcements are usually followed by Governor Adrian Orr’s press conference.