Ahead of the Reserve Bank of New Zealand (RBNZ) policy meeting, there is speculation that the central bank may signal its readiness to tighten monetary policy later this year.
Earlier, at the May session policy meeting, the central bank saw interest rates would begin to rise in September 2022.
Yet, with economic data continuing to show encouraging growth, analysts now see that the RBNZ will raise rates faster than expected.
Last week, ASB Bank predicted that the central bank would raise its interest rates in November 2021 compared to initial expectations for an increase in mid -2022.
This follows the publication of business confidence survey data which shows companies are increasingly confident of raising higher costs by raising prices.
In addition, the strong reading of Gross Domestic Product (GDP) data in June, also gave reason for market optimism as it rose 1.6% from the expected 0.5%.
However, at the same time, significant risks remain. New Zealand’s borders are still heavily closed to foreign countries and still low vaccination rates make it fragile where a Covid-19 attack could pose a major threat.
At the time of writing, the kiwi dollar is trading stable but is still around its monthly low against the US dollar at 0.6985.
