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Q1 2024 Financial Market Update: Central Bank Surprises and Market Reactions

Dwayne Jones, an experienced treasury specialist at Bancorp provides a quarterly finance market update, dissecting the current state of the New Zealand market.

As has been the case in recent times, our latest Financial Market Update is anything but boring. Despite four out of the five major global economies slowing in the second half of 2023, 2024 has started with a bang, culminating in an unprecedented number of central bank moves in March. The Bank of Japan (“BoJ”) hiked their key interest rate for the first time in 17 years, and into positive territory for the first time in 7-years. Conversely, the Swiss National Bank (“SNB”) cut interest rates, while the Federal Open Market Committee (“FOMC”), the Reserve Bank of Australia (“RBA”), the European Central Bank (“ECB”), and the Bank of England (“BoE”) all left their key interest rate settings unchanged.

At its March meeting, the FOMC maintained the Fed Funds range at 5.25%-5.50% and held their median dot-plot forecast of three rate cuts in 2024, although there were also some subtle changes after the Committee projected faster growth, higher core inflation, and lower unemployment in their updated 2024 forecasts.

We also had the usual post-RBNZ interviews in early March following February’s ‘dovish’ MPC meeting. Governor Adrian Orr confirmed, “Inflation is still too high, but it is falling. The economy is evolving as anticipated (although) monetary policy needs to stay restrictive for some time. We expect to begin normalising policy in 2025 with economic growth expected to begin picking up in 2024.” Unfortunately, the latest GDP report highlighted what we all suspected, that New Zealand has entered a double dip recession with 4 out of the last 5 quarterly prints in negative territory after Q4 2024 GDP fell -0.1% on the quarter and -0.3% on the year against forecasts at 0.0% and 0.1%. Meanwhile, the recently introduced monthly CPI index, which covers about 45% of the current quarterly inputs, showed a slight 0.7% increase in February to 4.9% on the year reflecting similar moves we are seeing in inflation internationally.

The possibility of interest rate cuts in the developed economies within the 2024 calendar year has seen equity market open the year in a particularly buoyant mood with the major exchanges rallying 8%-12%. Commodity markets have encountered sharp selling in the likes of lithium, cobalt, and nickel, although oil prices remain strong following December’s dip. Bond markets have also encountered heightened volatility amid record sovereign issuance while corporate issuance margins, and to a lesser extent, bank margins have continued Q4’s grind lower to be at 2.5-year lows. FX markets have been quiet, and predominately range bound.

Changes in the New Zealand Interest Rate Curve:

With the FOMC projected to start their cutting cycle from mid-year, any rebound in inflation could delay the start of this process which would impact the RBNZ’s cycle as per their Chief Economist’s comments that, “There’s a bit of wiggle room in there for us (the RBNZ) in terms of charting our own course, but I think it’s limited. If the Fed did start to cut towards the end of this year, and we didn’t, the FX rate would start to appreciate and would bring down inflationary pressures.” We suspect the recent poor Q3 GDP print will see the RBNZ bring forward their cutting cycle from Q1/Q2 2024 to late Q3/Q4 2024, maintaining our view that once the RBNZ starts its cutting cycle, it will target a neutral OCR rate which will ultimately be somewhere between 2.50%-3.25%.

Financial Market Update Insight: Here are a few key takeaways for New Zealand businesses in light of the recent events

As pro-active Treasury specialists, it is important that companies actively manage their funding arrangements and cross-border flows in order to protect against adverse movements and unnecessary risk. This includes, but is not limited to:

  1. Reviewing your treasury policy to ensure it is fit for purpose.

  2. Make sure the policy is covering your financial exposures. It’s not just FX and interest rates, but working capital, term-debt, commodities, cash, funding, and liquidity.

  3. Maintain policy compliance. This is what protects you and the company.

  4. Review your transactional banking arrangements, cashflow protection, receivables management, and forecasting.


This article was provided by Dwayne Jones, an experienced treasury specialist at Bancorp. Further quarterly reports will be provided by Dwayne and his team to keep you all up to date with the state of the market. For more information contact Dwayne via email at

or Dean Sharrar at

Bancorp accepts no liability for any actions taken or not taken on the basis of this information and it is not intended to provide the sole basis of any financial and/or business evaluation. Recipients of the information are required to rely on their own knowledge, investigations and judgements in any assessment of this information. Neither the whole nor any part of this information, nor any reference thereto, may be included in, with or attached to any document, circular, resolution, letter or statement without the prior written consent of Bancorp as to the form and content in which it appears.

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