FX.co ★ Kiwi Dollar Tumbles After RBNZ Unexpectedly Holds Rates

The New Zealand dollar dropped more than 1% to around $0.559, its lowest level in two weeks, after the Reserve Bank left its benchmark interest rate unchanged at 2.75%, defying market expectations for a 25-basis-point increase. Nonetheless, the committee signaled that further monetary tightening may still be required, depending on how the economic outlook evolves. The decision comes against a backdrop of persistent inflationary pressures: the central bank had raised the cash rate at its two previous meetings amid concerns that inflation was running outside its 1–3% target band. Analysts now expect price pressures to strengthen again in the fourth quarter, potentially pushing inflation above 4% and keeping it elevated for longer than previously anticipated, driven in large part by higher energy costs.