The NZD/USD pair fell to a two-month low of 0.6039 after New Zealand’s Consumer Price Index (CPI) rose by 2.2% year-over-year in the September quarter, meeting the Reserve Bank of New Zealand’s target range of 1% to 3%. The decline comes as the US Dollar (USD) receives support from strong jobs reports and inflation data, reducing expectations for aggressive easing by the Federal Reserve (Fed). The market is now forecasting a total of 125 basis points in rate cuts over the next year.
The CPI in New Zealand increased by 0.6% quarter-over-quarter in September, compared to a 0.4% rise in the June quarter, according to Stats NZ. This marks the first time since March 2021 that annual inflation is within the RBNZ target range. Prices are still rising, but at a slower rate than before, noted Nicola Growden, the consumer prices manager at Stats NZ.
The CME FedWatch Tool currently shows a 94.1% probability of a 25-basis-point rate cut in November, with no expectation of a larger 50-basis-point reduction. Federal Reserve Bank of Atlanta President Raphael Bostic anticipates just one more interest rate cut of 25 basis points this year, aligning with his projections from last month’s US central bank meeting. The median forecast was for 50 basis points beyond the 50 basis points already implemented in September.
The CPI, released by Statistics New Zealand on a quarterly basis, measures changes in the price of goods and services bought by New Zealand households. It is a key indicator to measure inflation and changes in purchasing trends. The YoY reading compares prices in the reference quarter to the same quarter a year earlier. A high reading is seen as bullish for the New Zealand Dollar (NZD), while a low reading is seen as bearish.
Overall, the NZD/USD pair is experiencing a downward trend as inflation in New Zealand slows to its lowest level in over three years. The US Dollar is being bolstered by positive economic data, which has reduced expectations for aggressive easing by the Fed. Investors are now expecting a total of 125 basis points in rate cuts over the next year, with a 94.1% probability of a 25-basis-point cut in November. Federal Reserve Bank of Atlanta President Raphael Bostic anticipates just one more interest rate cut of 25 basis points this year, in line with last month’s projections.
