Economists at ING discuss the Reserve Bank of New Zealand (RBNZ) meeting and its implications for the NZD.

Fiscal spending argues for a hawkish 25 bps hike  

“Last week, New Zealand’s government announced large spending plans and a set of more encouraging economic forecasts. All this has radically changed the picture for the Reserve Bank, which should hike by 25 bps to 5.50% this week and may revise its peak rate projections to 6.00% given new inflationary risks.”

“AUD/NZD has been on a descending pattern over the past week and we could see the 1.0485 December lows being tested on the back of RBA-RBNZ divergence.”