• AUD/NZD has dropped significantly to 1.1250 on RBNZ hikes interest rates by 50 bps.
• This is the fifth consecutive 50 bps rate hike which has pushed the OCR to 3.5%.
• Earlier, RBA surprised the FX domain by announcing a 25 bps rate, lesser than projections.

The AUD/NZD pair has witnessed a perpendicular fall after the Reserve Bank of New Zealand (RBNZ) hiked its Official Cash Rate (OCR) by 50 basis points (bps) consecutively for the fifth time. The extent of the rate hike is in line with the projections and has pushed the OCR to 3.5%. The cross has dropped firmly to near 1.1250.

It is worth noting that RBNZ Governor Adrian Orr has preferred to continue focusing on bringing price stability and has ditched focus on growth prospects for now. Mounting inflationary pressures are required to tame sooner as they will continue to hurt the wallets of households. For the second quarter of CY2022, the inflation rate was recorded at 7.3%.

On the Australian front, the aussie bulls are still in the hangover of a lower-than-projected rate hike by the Reserve Bank of Australia (RBA). In its October monetary policy meeting on Tuesday, RBA Governor hiked the OCR by 25 bps, lower than the expectations of 50 bps. RBA’s surprise move of ditching the 50 bps rate hike pattern at the fifth time restricted aussie at the lower side.

The current RBA’s OCR stood at 2.6% and the RBA is seeing the interest rate top around 3.85%. The novel approach of keeping the growth prospects along with the priority of cooling down price pressures by the RBA will reach the desired interest rates in 2023.