New Zealand Dollar Faces RBNZ Upside Risks: ING

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The New Zealand dollar could extend its rally in the wake of the RBNZ decision, says a leading bank.

ING Bank says the Reserve Bank of New Zealand (RBNZ) will boost the New Zealand dollar when it announces it has lifted its inflation and policy rate projections, having potentially cut interest rates too far last year.

The view suggests that any expectations of a 'dovish' takeaway from the new governor Anna Brennan are misplaced, and the Kiwi's strong start to 2026 can continue.

The decision, due Wednesday at 2 PM NZ time (01:00 GMT), will see rates left unchanged, but markets think the next move will be a hike, likely towards the end of the year.

The New Zealand dollar has risen against most peers this year as the tide shifts away from expecting further RBNZ cuts to expecting rate hikes. The risk is that Brennan and her team strike a more balanced approach, saying that they are open to either cutting or raising rates as the next move, depending on what the data does.

Any such guidance would signal a more nuanced view on the trajectory for interest rates and would be a pushback against the market's 'hawkish' shift over recent weeks.

But ING says the RBNZ will at least partly validate tightening expectations for this year.

"We expect two rate hikes from 3Q, taking rates to 2.75% by year-end and offering medium-term support to NZD," says ING.

The RBNZ has already overestimated the disinflation process as 4th quarter CPI surprised at 3.1% y/y versus the RBNZ's 2.7% estimate.

Core CPI read at 3.5% versus the 3.2% projection.

"This raises the question of whether the RBNZ cut rates too aggressively last year," says ING.

"The next few quarterly prints may be a make‑or‑break moment for NZD. Another hot reading could leave the RBNZ with little choice but to start considering rate hikes later this year," analysts add.

🎯 GBP/NZD year-ahead forecast: Consensus targets from our survey of over 30 investment bank projections. Request your copy.

The New Zealand dollar is one of the top performing major currencies of 2026, propelled by supportive global conditions and a strong Australian economy, proving that the performance of its nearest neighbour is important. However, signs of a domestic economic revival are also proving supportive.

The currency is up 4.0% against the pound this year, 4.0% up against the euro and 5.0% up against the dollar.

With no rate cut due on Wednesday, forward-looking language and new economic projections will drive the market reaction.

"A revision higher in inflation numbers would make a strong case for bringing forward the expected rate hike," says ING.

ING expects two rate hikes to 2.75% in New Zealand this year, starting in either September or October.

"In our view, this will be driven primarily by sticky headline inflation, which should make clear that the 2025 easing cycle went too far. We also think another hike will be needed in 2027 to bring rates back to the 3.0% neutral level," say analysts.

ING FX strategists see upside risks for NZD/USD after the meeting, "although we remain cautious on further rallies given recent excessively rapid appreciation relative to short‑term drivers."