New Zealand inflation slows more than expected to three-year low
NEW Zealand inflation slowed more than forecast to its weakest in three years in the second quarter.
The annual inflation rate fell to 3.3 per cent from 4 per cent in the first quarter, Statistics New Zealand said on Wednesday (Jul 17) in Wellington. Economists expected 3.4 per cent while the Reserve Bank of New Zealand (RBNZ) had forecast 3.6 per cent. Consumer prices advanced 0.4 per cent from three months earlier, less than the 0.5 per cent estimate of economists.
The RBNZ held the Official Cash Rate at 5.5 per cent last week but surprised markets by acknowledging signs of a deepening economic downturn, saying tight monetary policy may be curbing demand “more strongly than expected”. The central bank sounded much more confident that inflation will return to its 1 to 3 per cent target band this year, fuelling bets that interest-rate cuts could start within months.
The New Zealand dollar rose after the report. It bought 60.70 US cents at 11.05 am in Wellington from 60.50 cents beforehand. The kiwi has been under pressure this month as traders increased bets on rate cuts on mounting signs the economy contracted last quarter.
Rodrigo Catril, a strategist at National Australia Bank, said the inflation report was mixed, making a rate cut at the RBNZ’s next policy meeting in August too close to call.
“On the positive side, headline is still approaching target range, increasing confidence annual CPI will be in the band in the third quarter,” he said. “But the RBNZ is a true inflation-targeting bank and it will be concerned at the slow progress seen in non-tradables inflation.”
Annual non-tradables inflation, a closely watched indicator of domestic price pressures, slowed to 5.4 per cent in the second quarter from 5.8 per cent in the first, today’s report showed. The RBNZ tipped 5.3 per cent in its May projections.
Tradables prices, which reflect movements in global commodities and imported items, rose 0.3 per cent from a year earlier, down from 1.6 per cent in the first quarter.
Housing and household utilities was the largest contributor to the annual inflation rate due to rising prices for rent, construction of new houses and local government rates, the statistics agency said. Insurance costs jumped 14 per cent in the year.
Other details
- Non-tradables prices increased 0.9 per cent in the quarter; economists expected 0.8 per cent.
- Tradables prices fell 0.5 per cent in the quarter; economists expected a 0.1 per cent gain.
- Annual inflation rate is weakest since second quarter of 2021, when it was also 3.3 per cent. BLOOMBERG
Share with us your feedback on BT's products and services
