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Economists at ING expect the Reserve Bank of New Zealand to talk about QE tapering after signalling a rate hike by the second half of 2022. RBNZ’s hawkish expectations should propel the kiwi towards the 0.76 level in the last quarter of the year.

RBNZ fully aboard the hawkish wagon

“The RBNZ followed the Bank of Canada and added a clear hawkish bias in its policy message by signalling a rate hike in 2H22. We think the next step will be to signal QE tapering, if nothing else due to lower projected bond issuance by the NZ government.”

“The domestic housing market has failed to cool down yet, and more evidence that the government’s actions to deflate the housing bubble are insufficient will add fuel to the RBNZ’s hawkish expectations and provide extra support to NZD. We expect NZD/USD to touch 0.76 in 4Q21.”

“Dairy prices are at 10-year highs, although an extension of border controls will remain a drag on growth for longer.”