New Zealand inflation slows more than expected to 3-year low
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The annual inflation rate fell to 3.3 per cent from 4 per cent in the first quarter, Statistics New Zealand said on July 17 in Wellington.
PHOTO: REUTERS
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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 July 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,
The central bank sounded much more confident that inflation will return to its 1 per cent to 3 per cent target band in 2024, fuelling bets that interest-rate cuts could start within months.
The New Zealand dollar rose after the report. It bought 60.7 US cents (82 Singapore cents) at 11.05am in Wellington from 60.5 US cents earlier. The kiwi has been under pressure in July as traders increased bets on rate cuts on mounting signs the economy contracted last quarter.
Mr 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, the 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 were 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.
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