The announcement of an unchanged policy rate of 5.50% was accompanied by updated forecasts and projections for the official policy rate. The peak for the Official Cash Rate was nudged a little higher from 5.59% to 5.69% and the forecast for the OCR in 2026 showed the RBNZ now expected to cut by 50 bps less by that stage.

We suspect the level of hawkishness communicated today by the RBNZ is somewhat excessive and unlikely to be sustained in an environment of further declines in inflation on a global basis.

The surprise tone from today’s RBNZ meeting leaves short NZD positioning vulnerable. Leveraged Funds have recently increased short NZD positions. As of last Friday, a short NZD position was maintained for the second consecutive week and was the largest in eight weeks. Given the current poor USD sentiment, the RBNZ’s hawkish stance could see NZD advance further from here although NZD was already the 2nd best performing G10 currency this month before today’s gain.