New Zealand’s Reserve Bank inflation expectations rose to 2.37% in the first quarter, up from 2.28% in the previous quarter.
That is an increase of 0.09 percentage points quarter over quarter. The figure comes from the RBNZ’s Q1 survey of expected inflation.
Implications For RBNZ Policy
With inflation expectations rising to 2.37%, this points to the Reserve Bank of New Zealand keeping a hawkish stance. It also lowers the chance of interest rate cuts in the first half of 2026. Traders may expect the New Zealand dollar (NZD) to stay supported in the near term.
This reading matters even more because it follows the Q4 2025 CPI print of 3.1%, which is still above the central bank’s 1–3% target band. Sticky inflation suggests price pressures are easing slowly. That supports a “higher for longer” outlook for New Zealand’s official cash rate.
In the interest rate swaps market, the curve may shift higher as traders price out dovish expectations. Traders may look at strategies that benefit from stable or rising short-term rates, such as paying fixed on 2-year swaps. Overnight Index Swaps (OIS) may now price out most of the chance of a rate cut before the third quarter.
For currency derivatives, this backdrop supports the kiwi, especially against currencies backed by more dovish central banks, such as the Australian dollar. We expect stronger interest in NZD/USD call options, with attention on strikes above 0.6400 for March and April expiries. Implied volatility could also rise ahead of the next RBNZ meeting on February 25th.
Historical Context And Market Positioning
In 2023, the RBNZ was one of the last major central banks to move away from a hiking bias. That track record suggests the Bank may accept slower growth to bring inflation back to target. This history can support long NZD positions versus currencies where markets are more actively pricing in rate cuts.
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