The Reserve Bank of New Zealand maintained the cash rate at 5.5%, aligning with expectations while emphasising a hawkish stance due to persistent inflation.
The New Zealand dollar dropped to a one-week low of 61.21 US cents, as the market had a 25% chance of an anticipated rate increase.
The committee believes the current cash rate restricts demand, and a sustained decline in economic capacity is necessary for inflation to align with the 1 to 3 per cent target.
The RBNZ stands out as the only major central bank where markets anticipate a rate increase before easing monetary policy, with traders assigning a 50% chance of a move higher by May.