New Zealand Inflation Cools to 3.7% as Markets Brace for Potential Rate Hike
New Zealand's annual inflation slowed to 3.7% in Q3, missing forecasts. Despite the dip, markets anticipate a Reserve Bank interest rate hike next week.
POLICY WIRE — Wellington, New Zealand — New Zealand’s annual inflation rate decelerated to 3.7% during the third quarter, falling short of both analyst expectations and the Reserve Bank of New Zealand’s (RBNZ) own 3.9% projection.
Official data released on Thursday indicates that while the Consumer Price Index (CPI) rose by 0.7% for the quarter—missing the 0.8% forecast—the figure remains stubbornly above the central bank’s target range of 1% to 3%.
The cooling inflation data caused the New Zealand dollar to slip back below the 0.5700 level against the U.S. dollar, retreating from a four-week high. Despite the softer-than-expected reading, financial markets continue to price in a near-certain interest rate hike when the central bank meets on October 28.
Economists suggest the current decline in inflation may be short-lived, citing persistent core inflation measures that have firmed above 3%. Rising fuel costs remain a significant factor, with petrol prices surging 19.1% on an annual basis, even as they recorded a 6.5% drop for the quarter.
The Reserve Bank of New Zealand previously signaled concerns over underlying price pressures, leading to speculation that officials may pursue more aggressive monetary tightening to combat a potential rebound in the fourth quarter. The latest figures follow two consecutive interest rate hikes aimed at cooling economic activity.
Reporting by Policy-Wire (PW)
