In the Asian session, tomorrow morning, Wednesday, the 24th of November, the Reserve Bank of New Zealand (RBNZ) will announce its monetary policy and interest rates, as expectations indicate that the bank will raise interest rates for the second consecutive month by 25 basis points to reach 0.75%.

The New Zealand Bank raised interest rates on the sixth of October to become the first bank of the major economic banks around the world to raise interest rates if we exclude South Korea, which raised interest rates before it at the end of August, stressing that it will continue to raise it until inflation rates stabilize in the medium term.

The latest figures issued by the New Zealand economy confirmed that inflation is still rising above the bank’s estimates and target, as a survey conducted by the Reserve Bank of New Zealand every three months including business managers, economic professionals and industry leaders showed last week that inflation may rise to 2.96% in the last quarter of this year Compared to 2.27% in the second quarter survey, while expectations indicate that inflation will rise to 3.70% at an annual pace, compared to 3.02% in the third quarter estimates, at its highest level in 11 years.

New Zealand retail sales, which was announced on Monday evening, fell, but better than expectations, with a decline of 8.1% in the third quarter of this year, as the numbers were affected by the closure in August and September.

What is agreed upon is that the bank will raise interest rates, but the question is whether it will continue to raise it at the current pace, the most conservative 0.25%, or will it raise it by 0.50% this time, and based on the size of the hike, the movements of the New Zealand dollar will be.

The New Zealand dollar’s ​​declines since the beginning of the week yesterday, Monday, losing about 75 points against the US dollar, and trading now at 0.6925 levels, comes due to the fact that market expectations have decreased for a 50-point rate hike from about 40% to 30% since the beginning of the week due to fears of the return of the new wave of Covid 19 .

motion scenarios

A quarter point hike from the Reserve Bank of New Zealand, a large part of which was priced, and therefore it is not excluded that we will witness a continuation of declines when the decision is announced, especially if the interest rate decision contains a negative outlook (this scenario is widely expected).

A 50 basis point hike will support the NZD’s rise strongly because it is a highly unexpected move in the markets (expected by 30%).

Failure to raise interest rates from the Reserve Bank of New Zealand will cause sales of the New Zealand dollar (unexpected until the moment).