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New Zealand’s Q3 CPI inflation eases, easing pressure on RBNZ for interest rate hikes.

New Zealand Inflation Eases, Relieving Pressure on RBNZ

New Zealand Consumer Inflation Falls Below Expectations

New Zealand’s consumer inflation in the third quarter grew less than expected, providing some relief to the Reserve Bank of New Zealand (RBNZ) and reducing the need for further interest rate hikes this year. According to data from Statistics New Zealand, inflation grew by 5.6% in the 12 months leading up to September, lower than the anticipated 5.9% and the previous quarter’s 6%.

Quarterly Growth Slows Down, But Shows Improvement

Quarter-on-quarter, inflation grew by 1.8%, falling short of the expected 2%. However, this rate was an improvement from the previous quarter’s 1.1%. Despite the overall decline in inflation, core inflation remained elevated due to high transport and utility costs.

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Factors Contributing to the Decline in Inflation

The drop in headline inflation was primarily driven by softer import prices and the resolution of supply chain issues with New Zealand’s main trading partners. These factors played a significant role in easing inflationary pressures within the country.

RBNZ’s Approach and Future Outlook

The RBNZ has maintained its interest rates since May, aiming to strike a balance between curbing inflation and avoiding economic headwinds. With the recent easing of inflation, the RBNZ is expected to keep rates on hold, and analysts predict no rate hikes until next year.

Analysts’ Views on Rate Hike Possibility

According to analysts at Westpac, the chances of a rate hike in November have diminished. The timing and likelihood of future rate increases will depend on how rapidly core inflation pressures continue to ease in the upcoming quarters. The persistence of domestic price pressures suggests that the RBNZ is unlikely to consider rate cuts anytime soon.

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New Zealand’s Economic Recovery

New Zealand faced significant challenges this year, experiencing a technical recession due to high inflation and interest rates. However, the country saw a resurgence in the second quarter, as some of these headwinds began to ease, leading to renewed economic growth.

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