New Zealand reported the slowest quarterly increase in headline inflation since 1Q 2021, the annual rate also eased to 6.7% as it moves further below the 2Q 2022 peak of 7.3%.
It will be a notable surprise for the Reserve Bank of New Zealand which had been expecting the annual rate of headline inflation to remain at around 7.3%. The report will give the RBNZ more confidence that inflation peaked at around the turn of the year which increases the likelihood that the RBNZ could pause their rate hike cycle at its next policy meeting on May 24.
The New Zealand dollar has been the second worst-performing G10 currency this year, and developments will reinforce expectations for further weakness. There is more room for the RBA's policy rate to rise further at 3.60% in comparison with the RBNZ's policy rate at 5.25%.
- MUFG
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