Ultima Markets: [Market Hot Spots] New Zealand's Unfavorable New Year 5The month may be even more exciting...

This Wednesday（5month24The New Zealand Federal Reserve will announce5The latest interest rate decision for the month. Last week, the New Zealand government announced its latest budget report, which showed that economic growth exceeded expectations and reduced the risk of economic recession, which may prompt the New Zealand Federal Reserve to tighten monetary policy.

A determined interest rate hike

From inflation data, the price level in New Zealand showed a downward trend in the first quarter7.2%lower6.7%This indicates that the hawkish monetary policy of the past year has achieved results.

(New Zealand's inflation level in the past year)

The Reserve Bank of New Zealand4The official cash interest rate will be raised at the month's meeting50Bps to5.25%. The latest interest rate forecast indicates that the bank expects to raise again this week25Basis points.

(New Zealand Federal Reserve's interest rate level in the past year)

Ultima MarketsInvestment Research Group AnalystElonIt is believed that the slight increase in the New Zealand dollar against the US dollar indicates that the market is gradually digesting interest rate hikes25Expectations of basis points.Therefore, after the actual New Zealand interest rate resolution is announced, it is necessary to be cautious about the occurrence of buying expectations and selling facts.At the same time, the current market is more focused on the forward-looking guidance of the New Zealand Federal Reserve and the possibility of interest rate hikes still being implemented50The potential probability of a base point.

The New Zealand Federal Reserve may emphasize the risk of further tightening monetary policy while increasing the likelihood of future interest rate hikes by increasing the path of future interest rates. The New Zealand Federal Reserve may consider eliminating market expectations for interest rate cuts,Pay attention to whether the New Zealand Federal Reserve once again emphasizes the importance of2024There will be no interest rate reduction before the end of the year.

The impact of fiscal budget

As mentioned earlier, the market's response will mainly be influenced by forward-looking statements and new interest rate forecasts. The decrease in inflation rate will confirm the end of the Reserve Bank of New Zealand's interest rate hike cycle, but the recent budget report from the New Zealand Ministry of Finance is leading to new inflation risks.

Last week, the government announced an increase in spending to support the impact of high living costs and recent bad weather on the economy.2023The latest estimate of the budget deficit for the fiscal year is76Billion New Zealand dollars, compared to last year12The forecast for the month is much higher.

Ultima MarketsInvestment Research Group AnalystElonBelieving that the additional budget deficit implies a potential increase in price levels and a sharp decrease in the likelihood of future economic recession,This has increased to some extent5Monthly interest rate hike50Risk of basis points。

(AUD/NZD daily chart, fromUltima MarketsMT4)

Although they are both in Oceania, there have been recent differences in monetary policies between Australia and New Zealand. Especially if the New Zealand Federal Reserve chooses a more aggressive approach tomorrow50The benchmark interest rate level, the AUD/NZD, may further decline, and the lower edge of the downward channel will be a potential target for a decline.

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