NZD/USD moved towards a seven-week high after New Zealand’s Q2 CPI came in a touch above consensus, although it was slightly below the Reserve Bank of New Zealand’s May projection. Headline CPI rose 1.5% q/q versus a 1.4% consensus forecast and the RBNZ’s 1.6% estimate, compared with 0.9% in Q1, with higher petrol prices cited as a driver. Annual inflation accelerated to 4.1% against 4.0% consensus and a 4.2% RBNZ projection, up from 3.1% in Q1, while core inflation rose to the top of the RBNZ’s 1–3% target range.
Official Cash Rate Hike and Market Expectations
The RBNZ lifted the Official Cash Rate by 25bps to 2.50% at its 8 July meeting and signalled further increases. Markets are pricing 60bps of hikes by year-end and, over the next 12 months, 100bps of tightening to 3.50%, which would sit near the top of the RBNZ’s estimated neutral range of 2.20% to 4.10%.
