Macro
New Zealand inflation slows to 3.7%, below RBNZ forecast, but firmer core measures lift odds of an October hike
Headline CPI undershot the central bank's 3.9% projection as petrol fell, yet trimmed-mean and weighted-median inflation rose and Westpac now expects a hike on October 28.
HedgeWeekly News Desk ·
New Zealand's consumer prices rose 0.7% in the September quarter, taking annual inflation to 3.7% from 4.1% in the June quarter, Stats NZ data showed on Thursday. The outcome was below the Reserve Bank of New Zealand's 3.9% projection from its September Monetary Policy Statement and under the 3.8% market consensus. Of the major bank forecasters, only Westpac had pencilled in 3.7%.
Fuel did most of the work. Petrol prices fell about 6.5% over the quarter after a 20.1% jump in the June quarter, though they remained 19.1% higher than a year earlier. Partly offsetting that, international airfares climbed 14.3% in the quarter, which Stats NZ described as the largest quarterly rise since December 2022, while annual local council rates rose 6.2% and vegetable prices gained 10.5%.
Underlying measures moved the other way. The 30% trimmed mean rose to 3.0% from 2.6% and the weighted median to 3.1% from 2.7%, according to Westpac's analysis of the release, while annual inflation excluding food, household energy and vehicle fuels reached 2.9%. Price increases also broadened: 54.9% of the basket rose by more than 3% over the year, up from 38.5% in the June quarter.
For rates and FX investors, the split between a softer headline and firmer core is the key read-across to next week. The RBNZ lifted the official cash rate to 2.75% in September and next reviews policy on October 28; Westpac changed its call after the data from a December move to a 25 basis point hike in October, and said it expects headline inflation back above 4% before year-end as petrol prices rebound. The target band is 1% to 3%, so whether the RBNZ treats the fuel-driven undershoot as temporary will shape front-end New Zealand dollar pricing.