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Rate Decisions

New Zealand to Hold Fast

With the COVID outbreak largely controlled domestically, New Zealand is basically holding the line while the rest of the world gets the virus under control.

This poses a problem, as an important part of the island nation’s economy comes from tourism and travel.

Although Governor Orr has repeatedly said he’s not averse to negative rates, there is no expectation that there will be a cut this time around. Analysts overwhelmingly see the RBNZ preferring non-traditional policy approaches.

The current consensus is that they will increase the LSAP easing program to NZD85B.

The Market Reaction

The NZDUSD has been range-bound over the last several sessions. However, this is largely because of things happening outside New Zealand.

The USD has weakened in response to improved risk sentiment, which has led investors on a hunt for yield. This might have given the NZD an opportunity to move higher, but it is no longer a carry trade play as the central bank has sl...

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