WELLINGTON: New Zealand’s annual inflation rate fell sharply in the third quarter, returning to the central bank’s target band for the first time in more than three years.The rate fell to 2.2% from 3.3% in the second quarter, Statistics New Zealand said yesterday in Wellington.
The result matched economists’ expectations while the Reserve Bank of New Zealand (RBNZ) had forecast 2.3%. Consumer prices advanced 0.6% from three months earlier, less than the 0.7% estimate of economists.
The RBNZ began an easing cycle in August with a 25 basis-point cut to the official cash rate (OCR) and stepped up the pace last week, lowering it by 50 points to 4.75%.
With inflation slowing markedly and the economy likely back in recession, policymakers are expected to deliver another big cut at their meeting on Nov 27.
“Pricing pressures have cooled appreciably and there is the risk of inflation settling below 2%,” said Mark Smith, senior economist at ASB Bank in Auckland.
“A 50 basis-point cut in November followed by a sequence of 25-point cuts and a 3.25% OCR endpoint is our base case scenario, but risks are tilted to more front-loaded policy easing.”
The New Zealand dollar fell after the report, buying 60.69 US cents in Wellington, down from 60.90 cents beforehand.
Traders now see a 45% chance that the RBNZ could cut the OCR by 75 basis points next month, swaps data showed.
The RBNZ aims to keep inflation around the 2% midpoint of its 1% to 3% target band. Inflation, which peaked at 7.3% in 2022, was last inside the band in the first quarter of 2021.
Much of the decline in the annual rate has been driven by imported or so-called tradables prices.
They fell 1.6% from a year earlier, the first annual decline since late 2020. — Bloomberg