What did the RBNZ decide?
The rate did not change. The official cash rate (OCR) remained at 2.75%, even though the previous value was 2.5%. The market consensus was 3.00%, that is, a 25 basis point hike.
How confident the market was in a hike:
- About 90% - that was the probability of a rate increase priced in by quotes
- Five out of five major New Zealand banks forecast 3%
- 4 against 3 - the vote in the committee, the decision passed by a minimal margin
Why did the committee not raise?
The majority's arguments. The committee cited inflation of 3.7%, which came in below expectations. They also mentioned the weak pass-through of fuel prices into final goods and subdued wage growth.
Anna Breman, the bank's governor: all committee members agree: tighter policy will probably still be needed. Hikes could take the rate into restrictive territory.
How did the currency react?
NZD/USD went below 0.5600 in the Asian session. Reference levels on the chart:
- 0.5564 - the next support and the low of the current cycle
- 0.5663 - the nearest resistance
The contrast came from the neighboring market. In Australia, core inflation (trimmed mean) rose to 3.7% year on year versus a 3.6% forecast. The monthly headline accelerated to 4.3% in September.
The head of Australia's central bank, Michele Bullock, said plainly: inflation is too high. The Australian dollar moved up, and the AUD/NZD cross jumped sharply.
What next?
Two central banks diverged in their signals. This is the main story in Pacific currencies. What is worth keeping in the economic calendar:
- November 3. The Australian central bank meeting, where the market is increasingly leaning toward a hike.
- Tonight. The Fed decision: the market estimates the probability of keeping the 3.75-4.00% range at 92.8%.
Did you hold NZD through the meeting?
A couple of minutes between the release and the first candle decide everything. Someone was sitting in a long ahead of a hike that did not happen. Trading such nights is possible, but at prop firms this is a separate line in the rules: somewhere an entry a minute before a central bank decision is considered a violation, somewhere leverage is restricted on exotic pairs, and somewhere NZD and AUD are not on the list of instruments at all. This is read in the terms, not found out after the first annulled account. The Fed meeting is already tonight.