Commerzbank’s Volkmar Baur expects the Reserve Bank of New Zealand (RBNZ) to keep rates unchanged at its April meeting, despite the Reserve Bank of Australia’s (RBA) recent hike and the Third Gulf War shock. Markets price almost no chance of an immediate move, with any further tightening pushed into the second half of 2026 and highly dependent on global developments rather than domestic data.

RBNZ cautious after Gulf War shock

"Early tomorrow morning (GMT), the Reserve Bank of New Zealand (RBNZ) will convene for its second monetary policy meeting of the year and its first since the outbreak of the Third Gulf War. However, while the Reserve Bank of Australia on the other side of the Tasman Sea raised interest rates about three weeks ago, I do not expect the RBNZ to follow suit tomorrow."

"The market has priced in only a 5% chance of a rate hike, and not a single analyst surveyed by Bloomberg expects a hike in April. Since the war began, the market has indeed anticipated more rate hikes this year."

The market’s and analysts’ assessment aligns with Governor Anna Breman’s remarks from late March, in which she stated that, as a forward-looking central bank, one should first look beyond a supply shock -such as the one this conflict represents for New Zealand.

"However, Anna Breman also said that one should not wait until potential second-round effects manifest in inflation. In the coming weeks and months, the central bank will therefore place greater emphasis on price developments that can be observed at a higher frequency than inflation figures and will give greater weight to potential changes in wage trends and inflation expectations."

"We will certainly learn more details about the RBNZ’s thinking and how it intends to respond to this situation in the coming months at tomorrow’s meeting. A rate hike at the next meeting in May certainly cannot be ruled out, but it would likely be more closely tied to the external environment (the Gulf War) than to developments in New Zealand."

"Anything other than unchanged rates tomorrow would be a huge surprise and would move the Kiwi accordingly."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)