RBNZ holds rates, jolts currency markets ahead of Fed and BoC decisions

Traders Union
All News
Economic Data
RBNZ holds rates, shakes markets

Highlights

Reserve Bank of New Zealand unexpectedly holds rates despite markets pricing over 70% chance of a hike, sending NZD down more than 1%.
Australian third-quarter inflation accelerates on higher fuel costs, boosting expectations for a fifth interest rate hike as early as next week.
SK Hynix announces $75 billion in shareholder returns after quarterly profit surges more than sevenfold, driven by strong AI-related chip demand.

Central bank signals reshape rate outlook

As reported by Reuters, the Reserve Bank of New Zealand unexpectedly leaves rates on hold in a narrowly split decision, even as policymakers agree that tighter policy is still needed. Westpac says it is the first time outside the pandemic that the central bank holds rates while markets had priced a more than 70% chance of an increase.

The move sends the New Zealand dollar down more than 1%, while the Australian dollar jumps 2% against its New Zealand counterpart to its highest level in 13 years. The decision comes before policy announcements later on Wednesday from the Federal Reserve and the Bank of Canada, with the Fed widely expected to stay on hold and the BoC seen raising rates by 25 basis points, though that view could still shift.

For investors, the RBNZ decision reinforces the risk that markets may be overpricing the pace of global tightening. Commonwealth Bank of Australia's Carol Kong says the outcome is a reminder that central banks are willing to surprise markets and do not take their cues from investor positioning.

Asia earnings and inflation keep markets alert

In Australia, third-quarter inflation picks up on higher fuel costs, while sticky underlying price pressures strengthen expectations of a fifth interest rate hike as soon as next week. That adds another layer of focus to policy expectations across the region as traders assess whether central banks are prepared to wait or press ahead with further tightening.

South Korean chipmaker SK Hynix announces shareholder returns of about $75 billion after reporting a more than sevenfold rise in quarterly profit, helped by continued strength in memory chip prices tied to AI infrastructure demand. The results help keep Asian stocks supported, with investors now watching earnings from Alphabet and Microsoft for evidence that the AI boom can generate returns quickly enough to justify its high cost.

Concerns over AI funding remain in focus as rising bond yields at AI cloud providers and record costs to insure Meta Platforms' debt add to scrutiny over how the infrastructure buildout is being financed, especially with higher U.S. interest rates looming. Elsewhere, Israel's wartime election appears deadlocked according to exit polls, with Gadi Eisenkot's opposition bloc running level with Prime Minister Benjamin Netanyahu's camp and neither side holding a clear route to power.

In our earlier article on the Fed’s internal debate over policy messaging ahead of its next meeting, we explained how conflicting signals from officials were shaping market pricing for another rate hike. We noted that a heavy stream of speeches and interviews helped cool expectations after September’s increase, even as fresh inflation data kept the outlook volatile.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.