From BigGo Finance · BigGo Finance · · 1m 50s
RBNZ Holds Rates in 4-3 Vote
New Zealand's central bank keeps rates steady despite market expectations for a hike, sending the kiwi dollar plummeting.
In brief
New Zealand's central bank keeps rates steady despite market expectations for a hike, sending the kiwi dollar plummeting. New Zealand's central bank held interest rates at 2.75% in a 4-3 vote, causing the kiwi dollar to drop 1.7% against the US dollar. Originally reported by BigGo Finance.
RBNZ holds rates
New Zealand's central bank unexpectedly held its Official Cash Rate at 2.75% on the 28th, with the Monetary Policy Committee narrowly approving the decision by a 4-3 vote.
Kiwi dollar plunges
The New Zealand dollar tumbled as much as 1.7% against the US dollar to 0.5586 after the announcement.
Market reaction
The benchmark NZX 50 equity index fell 0.5% in tandem, and the policy-sensitive two-year government bond yield dropped 12 basis points to 3.82%.
Economist expectations
Of 25 economists surveyed by the media, only 2 expected rates to stay on hold, with the rest forecasting a quarter-point hike.
Policy split
Those supporting a hike argued for a quarter-point increase to 3.00% to prevent inflation from becoming entrenched, while those favoring a wait-and-see approach focused on fragile recovery.
Inflation data
New Zealand's September-quarter inflation ran at 3.7% year-on-year, still above the 1% to 3% target range, with the central bank projecting it to rise to 4.4% in the December quarter.
Governor Breman
Governor Anna Breman said holding rates was consistent with prior communication and signaled future hikes may come.
Market impact
Stephen Toplis, head of research at Bank of New Zealand, called the decision 'frankly taken aback' and noted it pushed the kiwi dollar lower, intensifying inflation pressures.
Election context
The decision comes just 10 days before New Zealand's general election, with economic and inflation outlook a focal issue for voters.
The short version
New Zealand's central bank held interest rates at 2.75% in a 4-3 vote, causing the kiwi dollar to drop 1.7% against the US dollar.
