The events of the last 24 hours have made it clear that the RBA and RBNZ are on different monetary policy paths. The RBNZ hiked 50bp to 3.5%, as expected, in contrast to the RBA’s less-than-expected 25bp to 2.6% (see MNI Review here).
- Given the RBA is the first to pivot, a gap has begun to open up between it and the majors (see chart below) which is likely to widen given their preparedness to sacrifice growth to control inflation, in contrast to the RBA. This is likely to put downward pressure on the AUD generally and thus push up imported inflation (something the RBNZ commented on in regards to NZD weakness).
- The RBNZ began its tightening cycle 7 months before the RBA, yet the latter was the first of the major central banks to slow its pace of hiking.
- While both central banks have made it clear that they are committed to price stability, the RBNZ’s October statement remained hawkish whereas the RBA’s was balanced. The policy rate spread is likely to grow.
Source: MNI - Market News, Refinitiv