NZD/USD is falling to 0.6557, down -0.23% on a day, after New Zealand released as weak as a kitten inflation figures. Economists at ANZ Bank underline the need for further action from the RBNZ due to these numbers and employment headwinds.
Key quotes
“Headline CPI contracted 0.5% QoQ in Q2, with annual inflation decelerating 1% to 1.5%. Non-tradable (domestic) inflation was flat (0.0% QoQ, as we had pencilled in), with the annual read slowing 0.3% to 3.1%. Tradable inflation contracted a little more than expected, down 1.2% QoQ (ANZ: -1.1%), to be down 0.6% YoY.”
“We expect headline CPI will be running below the 1-3% target band by year-end.”
“The NZD is elevated, world prices are seeing deflationary pressure, inflation expectations are at record lows, and labour market capacity is set to increase markedly. The RBNZ has a momentous battle on its hands. Without further action or a significant change in the economic outlook, the risk of a persistent undershoot is likely to materialise.”
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