NZX 50 edges higher and New Zealand dollar falls after surprise RBNZ rate hold
New Zealand's central bank held its official cash rate at 2.75% in a narrow vote, surprising markets that expected an increase and prompting a sharp currency move.
New Zealand's NZX 50 closed higher and the New Zealand dollar fell on Wednesday, 28 October, after the Reserve Bank of New Zealand held its official cash rate at 2.75% in a four-to-three vote, according to NZ Herald. Markets had expected a 25-basis-point increase, making the decision a surprise for investors.
The S&P/NZX 50 rose from 13,613 at 2pm to an intraday high of 13,744 between 2pm and 3:10pm, NZ Herald reported. It closed at 13,691, a gain of 0.08%. The New Zealand dollar traded at 56.09 US cents late Wednesday in Wellington, down from 56.78 US cents immediately before the decision.
Which New Zealand shares gained after the rate decision
There were 81 gainers and 46 decliners on the main board, with 24.7 million shares traded for NZ$107.4 million, according to NZ Herald. Steel & Tube Holdings led the gainers, rising 6.9% to 31 cents. Serko gained 5.61% to NZ$1.13 and Metro Performance Glass rose 5.41% to 78 cents.
Craigs Investment Partners investment director Mark Lister described the vote as a close call. ‘It’s not something you see too often, where markets have got it so wrong,’ he told NZ Herald. The hold gave the Reserve Bank more time to assess further information, he said.
Why the RBNZ held rates despite inflation pressure
RNZ reported that Governor Anna Breman and the committee's three external members voted to hold the rate, while three senior Reserve Bank officials voted to raise it. The bank had signalled in September that it was likely to pause at this meeting while assessing the effect of earlier rate rises and the economic outlook.
The bank acknowledged stronger inflation pressure while restating its aim of returning inflation to 2%, RNZ reported. It expected annual inflation to reach 4.4% in the December quarter, largely reflecting fuel futures prices. Volatile oil and refined-fuel prices made its near-term forecast uncertain.
The bank said tighter monetary policy was likely to be required, conditional on the outlook. It saw signs of economic recovery but warned that a worsening global environment could weaken it, or that export strength might fail to reach jobs, incomes and household spending, according to RNZ.
Infometrics principal economist Brad Olsen told RNZ that the bank's tone was ‘decidedly dovish’, with considerable attention given to risks to the recovery and the global economy. ANZ chief economist Sharon Zollner called the vote a close decision and forecast a rate rise in December. That remains her forecast; the committee's next move depends on how the outlook develops.
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Sources and context
- NZ stocks rise after RBNZ surprises markets with OCR holdNZ Herald (NZME)
- Reserve Bank holds OCR at 2.75% in split decisionRadio New Zealand (RNZ)
AI-assisted article checked against the listed sources. NewsJaws did not conduct interviews or attend the reported events.