NZ dollar skids as RBNZ flags gradual hikes, Aussie supported

SYDNEY: The New Zealand dollar slid on Wednesday after the country’s central bank raised interest rates as expected but projected a more gradual and limited pace of further tightening than markets had wagered on. In contrast, the Australian dollar held steady after data showed the economy held up better than expected in the second quarter, narrowing the odds on another hike in rates there. At the same time, bond yields in both countries were swept up in a global selloff as fresh fighting in the Gulf lifted oil prices and stoked concerns about inflation. The Reserve Bank of New Zealand lifted its official cash rate by 25 basis points to 2.75% and flagged further tightening was likely, but emphasised that would be gradual and it saw significant downside risks to the economy. As a result, it projected rates at 2.81% by December and 3.15% at the end of 2027, barely higher than the previous forecast in May. Markets had priced in a faster pace of moves and a top around 3.5%. “Markets expected maybe a higher track and the market pricing was well above the track anyway,” said Westpac’s New Zealand strategist Imre Speizer. “I’d wrap it up as a slightly dovish hike,” he added. “Our arithmeti