The New Zealand dollar rose to $0.583, its highest level in more than two weeks, after the Reserve Bank of New Zealand signaled it is prepared to raise interest rates if core inflation accelerates. Governor Anna Breman said the central bank now expects somewhat weaker economic growth, but remains concerned about medium-term inflation pressures. She stressed that if inflation over the medium term begins to pick up, the RBNZ will respond decisively, which would mean higher interest rates.
On Wednesday, the central bank left its official cash rate unchanged at 2.25% for a second consecutive meeting, reiterating its commitment to bringing inflation back to the midpoint of its 1–3% target band. Financial markets are currently pricing in more than an 80% chance of a rate hike as soon as July, and expect the policy rate to reach 3% by the end of the year.
At the same time, investor sentiment remained cautious as the two-week ceasefire in the Middle East appeared at risk, following Israeli airstrikes in Lebanon.