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The New Zealand dollar climbed to around $0.582 on Thursday, rebounding from an earlier dip to $0.578, as investors weighed soft economic growth against mounting inflation risks. Fresh data showed the economy expanded by just 0.2% in the December quarter, falling short of both analysts’ expectations and the Reserve Bank of New Zealand’s projections of 0.4% and 0.5%, respectively. On an annual basis, GDP grew 1.3%, missing the 1.7% forecast but edging above the revised 1.1% increase recorded in the previous quarter.
The figures underscore the fragility of the recovery, with the war in the Middle East adding an additional layer of uncertainty to the 2026 outlook. Last month, the central bank kept its cash rate on hold, and Governor Anna Breman signaled that a rate hike might only be on the table in December amid signs of easing inflation. However, the recent spike in energy prices is now expected to push inflation well above the RBNZ’s 1–3% target band for much of the year, leading traders to price in rate increases in both September and December.
