New Zealand inflation cools to 3.7% in Q3, undershoots 3.8% estimate
New Zealand's yearly consumer price growth eased to 3.7% in the third quarter, down from 4.1% and short of both the 3.8% consensus call and the RBNZ's own 3.9% forecast, pushing the New Zealand dollar lower against the greenback.
On a quarterly basis, prices advanced 0.7%, missing the 0.8% consensus. Figures from Statistics New Zealand pointed to tradable goods — a category covering imports like petrol and diesel — as the main source of weakness, even as non-tradable prices climbed a sturdier 1.0% for the quarter and 3.3% versus a year earlier.
Analysts at Westpac calculated that cheaper fuel alone pulled roughly 0.4 percentage points off the quarterly reading. The bank was the sole forecaster in a market poll to correctly predict the 3.7% figure, and it had described the soft print in advance as a brief pause rather than a lasting change in trend.
Because the result undershot expectations, pressure eases on the Reserve Bank of New Zealand, which had built in a 3.9% inflation estimate for the quarter back in September. The kiwi’s rally over the five sessions beforehand had been fueled by growing wagers on a rate increase at the central bank’s October 28 gathering, and this print has dented that view.
Immediately following the release, NZD/USD slipped from slightly above 0.5700 to just beneath that threshold, erasing close to a tenth of the gains built up during its five-day run from an October 14 trough near 0.5550. The currency pair’s rise had previously run out of steam just below its 50-day Exponential Moving Average, a ceiling it has not broken through since early September.
Why it matters: The cooler-than-expected New Zealand CPI Q3 print lowers the market’s implied probability of an RBNZ rate hike, a factor that heavily influences NZD/USD and other kiwi-linked pairs. Shifts in rate-hike expectations at the RBNZ also typically feed through to short-dated New Zealand government bond yields.
Source: FXStreet