New Zealand’s consumer price inflation rate fell more than expected in the second quarter, boosting bets that the economy is slowing at a pace that could prompt an interest rate cut by the Reserve Bank.
China’s gross domestic product grew 3.3% year-on-year in the three months to June 30, government data showed on Wednesday. The reading was below expectations of 3.5% and was up 4% in the previous quarter.
The reading rose 0.4% on a quarterly basis, below expectations of 0.5% and slowing from 0.6% in the previous quarter.
The weaker CPI readings were driven mainly by slower spending on discretionary and recreational goods, reflecting lower consumer spending amid pressure from higher interest rates and relatively high inflation.
The CPI reading remained above the Reserve Bank of New Zealand’s annual target of 1% to 3%, but is now likely to fall within target in the second half of 2024, the central bank forecast.
The Reserve Bank of New Zealand had signaled at its July meeting that any rate cuts would depend largely on easing inflation. Wednesday’s reading has reinforced bets that the central bank will now have the confidence to start cutting rates later this year.
Further signs of easing inflation could give the Reserve Bank of New Zealand enough confidence to start cutting interest rates as early as November, Westpac analysts said in a recent note.
The New Zealand dollar was slightly higher after Wednesday’s reading, with the pair rising 0.2%.