NZD/USD consolidates around 0.6040, RBNZ policy comes into spotlight
- NZD/USD trades sideways around 0.6040 as investors shift their focus to the RBNZ policy.
- The RBNZ is expected to deliver a hawkish interest rate guidance.
- The US Dollar remains steady even as the US inflation cools down in January.
The NZD/USD pair trades in a tight range around 0.6040 during the European trading session on Monday. The Kiwi pair consolidates as investors await the interest rate decision by the Reserve Bank of New Zealand (RBNZ) on Wednesday.
Market participants expect the RBNZ to leave its Official Cash Rate (OCR) unchanged at 2.25% and to deliver a hawkish guidance on the interest rate outlook amid upside inflation risks. Price pressures in the New Zealand (NZ) economy have been accelerating consistently over the last four quarters. In the last quarter of 2025, the Consumer Price Index (CPI) grew at a faster pace of 3.1% on an annualized basis.
On Wednesday, investors will also focus on the Q4 Wage Price Index data, a key measure of wage growth. The wage growth measure is seen rising steadily by 0.8%.
Meanwhile, the US Dollar (USD) stays calm amid an extended weekend in the United States (US) on account of President’s Day.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades flat around 97.00.
The US Dollar trades broadly stable even as US inflation has cooled in January. The data showed on Friday that the US headline inflation cooled down to 2.4% Year-on-year (YoY) from 2.7% in December.
RBNZ FAQs
The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are achieving and maintaining price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the band of between 1% and 3% – and supporting maximum sustainable employment.
The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decides the appropriate level of the Official Cash Rate (OCR) according to its objectives. When inflation is above target, the bank will attempt to tame it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken NZD.
Employment is important for the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration in inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says.
In extreme situations, the Reserve Bank of New Zealand (RBNZ) can enact a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to buy assets – usually government or corporate bonds – from banks and other financial institutions with the aim to increase the domestic money supply and spur economic activity. QE usually results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the objectives of the central bank. The RBNZ used it during the Covid-19 pandemic.
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