New Zealand Dollar is happy with the RBNZ decision. Overview for 14.07.2021

NZDUSD moved upwards on Wednesday in response to the RBNZ decision to wind up the stimulus program. 

Kiwi dollar jumped against the USD after the July meeting of the Reserve Bank of New Zealand was over. The current quote for the instrument is 0.7001.

The July meeting of the RBNZ ended with the regulator’s unexpected decision to reduce stimulus by cutting its bond-buying program from 100 to 70 billion. The meeting protocol says that the QE volume that has been effective since mid-2020 might be reduced earlier to decrease inflation risks. At the same time, monetary policymakers agreed that major risks relating to deflation and the labor market went down, and it was time for the economy to try recovering by itself.

The benchmark interest rate remained unchanged at 0.25%. However, the decision to reduce stimulus suggests that there might be a rate hike as early as the August meeting. It might well be that the rate will add 25 basis points. According to the latest statistics, the New Zealand economy is ready for it. 

The RBNZ rate has been at 0.25% since spring 2020. Originally, it was reduced to create ultra-soft monetary conditions in the country for the period of the coronavirus pandemic. Global measures to support the country’s economy were approved at the same time. 

After the May meeting of the RBNZ, investors believed that the rate might increase in September 2022. However, the latest news suggests that it might happen much earlier.