NZD: RBNZ Survey: NZ inflation down to 2.30% Q2 ’24
The RBNZ inflation expectations for Two Year timeframe Q2 2024 is dropped to 2.33% from 2.50% forecasted in Q1 2024, One Year Timeframe is dropped to 2.73% ( Q2 2024) from 3.22% predicted in Q1 2024. NZ Dollar slight drop after the inflation expectations lower in the One Year and Two Year Timeframe.
NZDUSD has broken descending channel in upside
In the second quarter of 2024, the Reserve Bank of New Zealand’s (RBNZ) monetary conditions survey revealed a continued decline in inflation expectations across both the 12-month and two-year outlooks. This decline was observed on Tuesday.
In terms of the two-year horizon, which is considered the timeframe for RBNZ policy interventions to influence prices, inflation expectations eased marginally from 2.50% in the first quarter of 2024 to 2.33% in the second quarter of the same year.
Moreover, average one-year inflation expectations for New Zealand decreased to 2.73% in the second quarter of 2024, marking a notable drop from the 3.22% recorded in the preceding quarter.
NZD: RBNZ Q2: 2-Year Inflation Expectations Dip to 2.3% (Previously 2.5%)
In the second quarter of 2024, the Reserve Bank of New Zealand (RBNZ) reported a decrease in inflation expectations for both the two-year and one-year timeframes. Specifically, the inflation forecast for the two-year horizon dropped to 2.33% from the previously forecasted 2.50% in the first quarter of 2024. Similarly, the projected inflation rate for the one-year timeframe decreased to 2.73% in the second quarter of 2024 from the earlier prediction of 3.22% in the first quarter.
GBPNZD is moving in an Expanding channel and the market has rebounded from the lower low area of the channel
Following the release of these revised inflation expectations, there was a slight depreciation in the value of the New Zealand Dollar. This reaction in the currency market was likely driven by the downward adjustment in inflation expectations for both the one-year and two-year periods, which could signal potential future monetary policy adjustments aimed at stimulating economic growth.
For the Reserve Bank of New Zealand (RBNZ), the two-year horizon holds particular significance as it perceives this period as reasonable for the effects of its policy adjustments to manifest.
On May 13, 2024, the RBNZ announced its latest inflation expectations. This announcement prompted a decline in the NZD/USD currency pair, with traders interpreting the data release as a positive indicator for potential future rate cuts. This interpretation hinges on the belief that the RBNZ’s downward adjustment in inflation expectations may signal forthcoming monetary policy easing measures.
NZD: Rents, Fuel, and Food Support Inflation
Amidst the second quarter of 2024, the Reserve Bank of New Zealand (RBNZ) unveiled a notable decline in inflation expectations across both short-term and medium-term outlooks. Specifically, projections for the two-year timeframe decreased to 2.33% from the previous 2.50% forecast recorded in the first quarter of the year. Similarly, expectations for the one-year horizon saw a drop to 2.73% in the second quarter from the earlier 3.22% prediction in the first quarter.
EURNZD is moving in box pattern and market has rebounded from the support area of the pattern
This downward revision in inflation expectations had repercussions in the currency market, where the New Zealand Dollar experienced a slight depreciation. Analysts attributed this reaction to the adjusted forecasts for both short and medium-term inflation rates, indicating a potential shift in monetary policy aimed at bolstering economic expansion.
Inflationary pressures experienced a modest uptick last month, primarily driven by increases in food prices, which saw their first rise in three months, alongside escalations in fuel and rents.
According to Stats NZ’s partial assessment of monthly prices, food prices climbed by 0.6 percent compared to March, resulting in a 0.8 percent year-on-year increase. While the cost of fruits and vegetables declined, mitigating overall price hikes, most other categories witnessed upticks, with groceries showing an increase of over 1 percent, led by higher prices for chocolate, potato chips, and olive oil.
James Mitchell, consumer prices manager, noted that while the cost of stocking up on fruits and vegetables decreased for the third consecutive month, expenses associated with purchasing other food items and dining out escalated.
Food prices, constituting nearly 19 percent of the consumer price index (CPI), serve as a significant component influencing inflation. Following closely behind are rents, which experienced marginal month-on-month increases but surged by 4.6 percent compared to the previous year.
Petrol prices surged by nearly 2 percent in the month and recorded a 15 percent year-on-year increase, while local airfares saw a 5 percent decline.
The prices surveyed represent almost half of the CPI.
ANZ economist Henry Russell acknowledged that the observed price hikes exceeded expectations, covering products and services that exhibit greater volatility. However, he urged caution in overinterpreting these trends, emphasizing that the deviation was not substantial enough to alter projections for the second quarter CPI. Russell expressed confidence that headline inflation would return to within the Reserve Bank of New Zealand’s target band of 1-3 percent in the third quarter of the year.
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