Don’t you just love fresh beginnings? Meeting for the first time in 2026, the RBNZ felt like a whole new central bank last week. New leadership can do that. (See our full review here).

As expected, the cash rate was left unchanged at 2.25% under a unanimous decision. New Governor, Anna Breman, made her mark with a simple, well delivered, statement and OCR track. Something which in the past, as recently as November, has not been well executed.

The RBNZ called time on the easing cycle, lifting the OCR track. The next move in monetary policy is up. And the timing of that move has been brought forward. Ending the year at 2.38%, the OCR track implies a good chance of the first hike happening at the end of this year. However, as Governor Breman said in the press conference, such a move is not entirely priced in. It’s not a done deal. Ultimately, we think the Kiwi economy will need a little more time to be fully mended and as such remain of the view rate hikes kicking off in early 2027. But we’re on the same page. The economy must recover, before they hike.

The Kiwi economic recovery is in the “early stages” as the RBNZ put it. There’s a lot left to do. There’s a lot of time that’s needed to heal.

Importantly, the MPC committee, like us, are confident that inflation will fall to the 2 percent midpoint over the next 12 months. Spare capacity in the economy, modest wage growth, and core inflation within the target band suggest as much.

Overall, the RBNZ delivered a commentary that was easily absorbed by market traders, and economists. The reaction in wholesale rates and FX was textbook. Why? Because markets didn’t move much… and the moves that did occur, were in the right direction. Breman’s take on the world and Kiwi economy failed to meet overzealous calls for rate hikes (just because the Aussies are doing it). Leading into last week’s decision, wholesale rates had glided lower. Positioning was unwound, and the market better balanced. Overeager calls for rate hikes were tempered. And that got wholesale rates lower, by ~5-9bps. That’s a win. And thoughts of a stronger spike in the Kiwi dollar have vanished, at least for now.

In other news, just as things were starting to feel a little quieter out of the US, we were hit with some big developments over the weekend. The U.S. Supreme Court struck down President Trump’s wide‑sweeping reciprocal tariffs, ruling that he had indeed exceeded his authority and misused emergency powers.

Trying to hold his trade agenda together, Trump quickly announced a global 10% tariff on all foreign goods, which a day later, was scribbled out and lifted to 15%. These new baseline tariffs are legal under the 1974 Trade Act, but only for a maximum of 150 days. After that, congressional approval will be needed for anything to remain in place.

From a New Zealand perspective, the blanket 15% is no different from what we were already facing. And as far as we understand at this stage, our beef, kiwifruit, and other key agri exports still appear to be exempt under earlier agreements. Though admittedly there’s still a fair bit of murkiness around the details. Prime Minister, Christopher Luxon, at least seemed to think such exemptions remained when discussing the matter on the Mike Hosking show this morning.

Financial Markets

The comments below were provided by Kiwibank traders. Trader comments may not reflect the view of the research team.

In rates, a dovish leaning RBNZ’s see’s Kiwi yields lower

“Kiwi yields have resumed the downward trend that began in early February. The recent peak in the 2 year swap at 3.16% already feels like a distant memory, with a dovish leaning RBNZ driving the rate down to 2.91%. Markets have significantly pared back expectations for tightening: the number of hikes priced for 2026 has halved since the +60bp peak in January, with only +28bp priced for this year and a total of around +125bp by early 2028. This now sits much more in line with the RBNZ’s own guidance.

In theory, this should allow a period of relative calm in NZ markets, as investors wait for data strong enough to justify revisiting more than a single +25bp hike this year. Any upward repricing from here will require decisively stronger, capacity utilising data. In the near term, partial GDP data coupled with high frequency indicators such as confidence surveys and PMI will drive sentiment. Mortgage fixing remains concentrated in the 1 to 3 year maturities, and the clustering of rollovers raises the prospect of one sided flows that could put upward pressure on yields.

At the long end, Kiwi yields are conflicted. Typically, domestic developments have limited influence beyond five year maturities, yet the post MPS dovish shift has pulled mid and long end rates lower. This has widened spreads versus Australia, mirrored in the weaker NZD/AUD, as the Australian economy continues to outperform. Spreads versus the US have remained comparatively stable. This leaves the Kiwi longer end in a push/pull highly flow driven environment based on geographic spread trades and offshore sentiment.

Independent of offshore moves, the NZ curve should steepen under a delayed tightening path from the RBNZ; however, this steepening is likely to be concentrated in the short to mid area, particularly between the 1 year and 2 year tenors.

We now know the RBNZ’s bias. It’s up to the data to prove them wrong.” Ross Weston, Head of Balance Sheet Management – Treasury.

In currencies, the OCR track corrects the Kiwi lower

“Last week the RBNZ delivered a very clear message in their OCR track, moving the Kiwi dollar lower. And where we go from here will be very dependent on the data, and in the short term before major releases, this will be in the high frequency data. The MPS last week saw rates move into an arguably more reasonable point for the time being, and the Kiwi dollar depreciated against the US and Aussie dollars. Prior to the MPS the Kiwi was trading at 0.6050 vs the dollar, in a bit of a ‘no man’s land’ as market participants waited for direction. The clear message in the OCR track and in the comments from Dr Breman in the press conference made it clear that the market had got somewhat ahead of itself, having priced in hikes as soon as October this year. With the RBNZ clearly on hold (quite possibly for the rest of the year), the Kiwi softened back into the high 0.5900s initially (0.5980), and as the week closed, some positive data prints out of the US saw the Greenback push the Kiwi lower again to close the week around 0.5943. The NZDAUD cross initially dipped to 0.8480 (0.8540 prior), and the positive Aussie employment data saw further moves lower down to 0.8452 to close the week. From here, we think it is possible for the Kiwi to head a touch lower in the short-term vs the US dollar, potentially into the high 0.5800’s if we see the US dollar index extend its current rally beyond 98. On the NZDAUD cross, we are once again close to testing multiyear support levels. While there is not a lot to support the NZDAUD cross from a fundamentals perspective, market positioning is such that a correction higher could easily be on the cards. In the short/medium term, we watch the high frequency domestic data unfold; if it tells a good story, then we should see the Kiwi rebound from current levels. In the very short term, global factors are what will drive direction. The unknowns around tariffs could potentially have an impact this week, and the Aussie CPI print has the potential to push the NZDAD cross lower if the inflation print is hotter than expected.” Mieneke Perniskie– Senior Dealer, Financial Markets.

Weekly Calendar

• After another firm Aussie jobs report last week, all eyes will turn this week to Australia’s monthly CPI print for January due out on Wednesday. Consensus is for the headline annual rate to ease slightly from 3.8% to 3.7%. However, trimmed mean inflation, the RBA’s preferred measure of core inflation, is expected to prove stickier and hold at 3.3%. Overall upward pressure is expected to come from electricity, health services, and fruit and veg, with some offset from holiday travel and fuel. We know of course that the RBA is still preferring the less volatile quarterly measures of inflation. However, any strong surprises in headline or core inflation come Wednesday could easily give markets something to run with.
• Besides the finalised print for Euro Zone inflation, which is expected to match the provisional estimates released earlier this month, market attention will shift to the US PPI data on Friday. Wholesale prices are forecast to rise 0.3% in January, following a strong 0.5% increase in December. On an annual basis, such an outcome would see the PPI easing from 3.0% to 2.6%. Over the course of the year, it will be interesting to see whether the removal of Trump’s reciprocal tariffs helps bring further relief to producer prices. Though such an impact would likely be gradual and a while away yet.

See our 'Weekly Calendar' for more