New Zealand Q2 Cpi Declines

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New Zealand Q2 Cpi Declines

New Zealand'S Q2 Cpi Declines More Than Expected

New Zealand's CPI (Consumer Price Index) declined a lot more than expected during Q2 2024. This is a sign that the economy is cooling down, and the Reserve Bank will have to lower the policy rate.

New Zealand's CPI increased by 3.3% y/y during the 2nd quarter, according to the government data. The reading was even lower than the forecast of 3.5% and Q1's reading of 4.0%.

Cpi Is Only Inches Away From Rbnz Target

The CPI q/q showed a 0.4% increase, which was also below the forecast of 0.5%. Similarly, the previous quarter's reading was 0.6%, which means New Zealand's economy is indeed cooling down.

Experts believe that the weaker CPI reading in New Zealand is a direct result of slower spending on recreational/discretionary items. In simple words, consumer spending in New Zealand has gone down due to higher inflation and higher rates.

Right now, the CPI reading is still slightly above the 1-3% target of the RBNZ. However, experts believe that it will likely fall in the range during the 2H2024.

At the July meeting of the RBNZ, the central bank made it clear that rate cuts will depend on the progress of disinflation. Now that the inflation is just inches away from the upper range of 3%, the prospects of a rate cut from the RBNZ have increased once again.

Many experts believe that the RBNZ will likely start to cut the rates starting in 2024 and will not wait till the next year. After all, weaker consumer spending and higher rates are also affecting economic growth.

Any more signs that hint at easing inflation will provide more confidence to the RBNZ regarding the rate cuts. According to Westpac analysts, the rate cuts from the RBNZ will start in November 2024.

After the release of New Zealand's CPI reading, the NZD/USD pair jumped up by 0.2%. However, we believe that it has more to do with the fact that the Federal Reserve will be the first central bank to cut rates.

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