New Zealand's bank raised key interest rate to 5.5%, signaling next move to be a cut

Posted on May 29, 2023   |  

New Zealand's central bank increased interest rates by 25 basis points to the highest in over 14 years at 5.5%, signaling they are done hiking and ended its bold hiking cycle since 1999.

The Reserve Bank of New Zealand predicts the official currency rate to grow at its existing level of 5.5% but will need to be at the restrictive level til mid-2024 to secure inflation returns.

New Zealand's annual inflation is running below a 3-decade high of 6.7%, with expectations, in 2 years, it will return to the central bank's 1% to 3% target.

The NZD (New Zealand dollar) fell by 1.25% to a 3-week low of $0.6168 after the rate decision, while standard 2-year interest rate trades dropped to 5.1970%.