New Zealand’s quarterly CPI reading came in slightly weaker than expected at 0.6% versus 0.7% in the second quarter of 2024, bringing the annual inflation reading down from 3.3% to 2.2% – within the central bank’s target range of 1-3%.
This represents the slowest pace of increase in year-on-year price pressures since early 2021 and the first time the annual CPI number has returned to the Reserve Bank of New Zealand’s target range in more than three years.
Link to New Zealand CPI Report (Q2 2024)
Components of the inflation report revealed that gains came from local authority prices and payments, vegetables and pharmaceutical products while lower petrol and early childhood education prices were reported.
Market reactions
New Zealand dollar against major currencies: 5 minutes
Overlay of the New Zealand dollar against major currencies Chart by TradingView
The New Zealand dollar, which saw a spike in volatility an hour before the CPI release, took a hit after seeing weaker than expected numbers which boosted expectations of another interest rate cut from the Reserve Bank of New Zealand at their next meeting.
After a brief pullback from the initial reaction, the New Zealand dollar resumed its decline to post-CPI levels before moving sideways against the majority of its peers, with the exception of the Australian dollar.
From there, NZD pairs went on another bearish run against their lower-yielding FX counterparts roughly two hours after the CPI numbers were printed while the AUD/NZD deviated from the pack.