New Zealand Inflation Supports Potential Rate Cut

Highlights:

• Inflation Within Target: New Zealand's annual CPI rose 2.2% for the December quarter, remaining within the Reserve Bank of New Zealand's target range, while quarterly inflation registered a 0.5% increase.
• Diverging Inflation Trends: Tradeable inflation fell 1.1% year-on-year despite a 0.3% quarterly rise, while non-tradeable inflation increased 3.1% annually, signaling robust domestic demand.
• Rate Cut Expected: The stable inflation figures support market expectations of a 50-basis-point rate cut by the RBNZ next month to bolster economic growth.

Inflation Remains in Target Range

The Reserve Bank of New Zealand's (RBNZ) inflation target range remains intact, signaling the possibility of a 50-basis-point rate cut in the upcoming month. According to data from Stats NZ, the Consumers Price Index (CPI) rose by 2.2% in the 12 months ending December. This mirrors the annual increase recorded in the September quarter, while quarterly inflation registered a 0.5% rise at the time of writing.

Tradeable and Non-Tradeable Inflation Trends

Imported, or tradeable inflation, showed a modest 0.3% quarter-on-quarter increase. However, the annual figure reflected a decline of 1.1%, indicating external pressures are easing. Conversely, non-tradeable inflation, which captures domestic cost increases, rose by 0.6% for the quarter and 3.1% year-on-year, highlighting resilience in local demand.

Outlook for Monetary Policy

The steady inflation figures reinforce expectations that the RBNZ may implement a rate cut in its next policy review to support economic growth. Analysts anticipate the central bank will leverage these conditions to address broader economic challenges, particularly in tradeable goods.

Economic Implications

The inflation data suggests a balanced economic environment, with steady domestic price increases and manageable external influences. The anticipated rate cut could further stimulate economic activity, potentially benefiting industries reliant on domestic demand.

At the time of writing, the market continues to monitor the RBNZ’s moves, as its policy decisions are likely to shape New Zealand's economic trajectory in 2024.

Disclaimer for Kapitales Research

The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.

Customer Notice:

Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.

Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com