International Forex News - September 2

Reserve Bank of New Zealand Raises Rates by 25 Basis Points; Risk of Further Large Increases Reduced

On September 2, the Reserve Bank of New Zealand unanimously decided to raise the Official Cash Rate (OCR) by 25 basis points to 2.75%. The RBNZ said inflation rose to 4.1% in the June quarter as fuel prices increased because of the Middle East conflict. Core inflation, expected wage growth and inflation expectations remain consistent with inflation returning to the 1%-3% target range by mid-2027 and reaching the 2% target midpoint later next year.
The New Zealand economy has likely resumed its recovery after weak growth in the June quarter, although the recovery remains uneven. Economic recovery is expected to strengthen and broaden further. The global economy faces significant risks that could affect commodity prices and export demand. New Zealand's recovery could be stronger or weaker than expected, while price pressures could cause inflation to persist for longer than anticipated.
The Committee will remain vigilant and act as necessary to ensure that inflation returns sustainably to the 2% target midpoint over the medium term. It considers that a gradual withdrawal of monetary stimulus will help return inflation to the 2% midpoint while supporting economic growth and employment. This decision reduces the risk that further large rate increases will be required in the future. Future policy decisions will depend on the Committee's assessment of the balance of medium-term inflation risks.

Probability of the Federal Reserve Holding Rates Unchanged in September at 33.1%

On September 2, according to CME FedWatch, the probability that the Federal Reserve will keep interest rates unchanged through September is 33.1%, while the probability of a cumulative 25-basis-point rate increase is 66.9%. By October, the probability of unchanged rates is 22.5%, the probability of a cumulative 25-basis-point increase is 56.0%, and the probability of a cumulative 50-basis-point increase is 21.5%.