New Zealand - RBNZ wary of raising interest rates too soon

The Reserve Bank of New Zealand’s decision to leave interest rates at 1.75% today and signal that it doesn’t expect to raise rates until late 2019 supports our view that the financial markets have got ahead of themselves by pricing in rate hikes for early next year. That said, we believe that the RBNZ is being a bit too dovish and that rates may have to start rising early in 2019. Our forecast suggests that the New Zealand dollar could yet weaken from US$0.69 to US$0.65 by the end of this year.