September 29, 2021

Investors Confused, RBNZ Wants To Raise Interest Rates Or Not?

 Kiwi dollar investors are now divided on whether the New Zealand Central Bank (RBNZ) will start raising interest rates at a policy meeting next week, as the number of Covid-19 infection cases in Auckland shows a resurgence.

The number of coronavirus cases in New Zealand rose to a daily high today, with a total of 45 cases all reported in Auckland.

This has caused the market to worry that coronavirus restrictions in the city are being extended for longer, or may be tightened further to level 2 from the ongoing level 3.

The RBNZ will hold a monetary policy meeting on Wednesday next week, where the market now expects the central bank to start raising interest rates by at least 25 basis points from the previous 50 basis points.

Comments from RBNZ Assistant Governor Christian Hawkesby last week suggested that the central bank is likely to raise rates gradually by 25 basis points.

However, with the resurgence of coronavirus cases in Auckland, investors doubt whether the central bank will implement it, given that the RBNZ had previously delayed the rate hike after 1 case was detected in the country in August.

At the time of writing, the kiwi dollar is trading lower around a five -week low against the greenback dollar at 0.6948.