New Zealand’s annual inflation eased in the September quarter but remained above the central bank’s target, leaving the Oct. 28 policy review in focus for households and currency markets.
Statistics New Zealand (Stats NZ) said the consumer price index (CPI) increased 0.7% over the September quarter and 3.7% from a year earlier. The June quarter figures were 1.5% and 4.1%, respectively.
The annual reading was below the 3.8% forecast in a Reuters poll, whose economists had expected a 0.8% quarterly rise. Westpac NZ Senior Economist Satish Ranchhod had forecast 3.7% annual inflation and 0.7% quarterly inflation, matching the published figures.
More than 85% of items in the CPI basket cost more than they did a year earlier, Stats NZ said. Petrol was the largest upward contributor: its price was 19.1% higher year over year and accounted for 17.5% of the annual inflation rate, despite falling 6.5% during the September quarter. Costs for newly built homes were 3.2% higher than a year earlier. Stats NZ calculated that annual inflation would have been 3.2% if petrol prices had not changed from a year earlier.
The Reserve Bank of New Zealand (RBNZ) said higher fuel costs were cutting into household disposable incomes. Its September outlook projected annual inflation of 3.9% for the September quarter, and the bank targets inflation within a 1%–3% band.
Reuters reported that NZD/USD dipped to $0.5692 after the release. Before the data, FXStreet reported five consecutive daily gains, with the pair above $0.5700 at its highest level since Sept. 23.
The RBNZ raised its Official Cash Rate by 25 basis points to 2.75% on Sept. 2. Reuters said markets priced a 98% chance of another increase at the next review. The bank’s next scheduled Monetary Policy Review is Wednesday, Oct. 28.
