In the medium term, we see further potential for a recovery in the course of 2024. On the one hand, there are increasing signs that the US economy is slipping into a recession, albeit a mild one. We therefore expect the Fed to cut rates by 100 bps next year. On the other hand, the RNBZ has significantly less room for manoeuvre to make similar interest rate cuts. After all, inflation is still proving to be very stubborn. Despite the early and sharp interest rate hikes, inflation is still some way from returning to the target range of 1-3% on a sustained basis.

In 2025, inflation is likely to prove more stubborn than expected globally, as it has already in New Zealand. The Fed is then likely to return to a more hawkish stance, which should benefit the US Dollar. However, as the RBNZ has proven to be quite resolute in its fight against inflation, the downside potential for the NZD/USD should remain limited.