The Reserve Bank of New Zealand is expected to raise interest rates by 25 basis points this week, with policy guidance becoming the key for the New Zealand dollar.

1. Investors generally expect the Reserve Bank of New Zealand to raise interest rates by 25 basis points to 3.0% on Wednesday, due to persistently high energy costs, which are also transmitting into core inflation. The New Zealand dollar rebounded 0.26% against the US dollar on Tuesday, trading near 0.5696. 2. The market also expects about a 60% probability of a further rate hike in December, with the terminal rate in this cycle likely to reach around 3.75%, higher than the Reserve Bank of New Zealand's own forecast of 3.2%. 3. Kiwibank senior trader Mieneke Perniskie stated that the Reserve Bank of New Zealand meeting is crucial for the New Zealand dollar, especially regarding its guidance on the future policy path. 4. He said the market has already priced in a considerable degree of policy tightening expectations; if these expectations are not met, the New Zealand dollar will face downside risks.