TD Securities’ Global Strategy Team expects the Reserve Bank of New Zealand (RBNZ) to keep the Official Cash Rate unchanged, matching market consensus. It expects RBNZ communication to focus on patience in responding to supply shocks while the economy is operating below capacity.
The team says markets are pricing in more than 75 bps of rate rises in 2026. It describes this level of pricing as excessive and plans to review the meeting Minutes for any indication of earlier tightening.
Reserve Bank Of New Zealand Outlook
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We are not expecting any change to the cash rate from the Reserve Bank of New Zealand. The bank will likely emphasize patience because the economy is running below its full potential. This view challenges the market’s current pricing of more than three rate hikes before the year is out.
The bank’s cautious stance is understandable given recent data showing the economy is weak. We saw GDP growth turn slightly negative at -0.1% at the end of 2025, and the unemployment rate has climbed to 4.8%. While Q1 inflation is still sticky at 3.1%, the RBNZ will likely prioritize growth over fighting this last bit of inflation for now.
For derivative traders, this suggests positioning for interest rates to be lower than the market currently implies. We saw a similar pattern throughout 2025, where the market got ahead of the central bank’s actual pace, rewarding those who bet against aggressive tightening. Therefore, positions that benefit from the RBNZ holding rates steady, such as receiving fixed in interest rate swaps, could be favorable.
What To Watch In The Minutes
The key is to watch the language in the upcoming meeting minutes very closely. Any wording that hints the Bank is losing patience with inflation or sees growth picking up would be a sign to exit these positions. This communication will be the primary catalyst for the market in the coming weeks.
