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CPI edges ahead of New Zealand dollar

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The New Zealand dollar traded at 0.65 on Tuesday. NZD//USD has had a strong week with 1.39% gains and climbing to seven-month highs.

CPI in New Zealand is a hot topic for markets

CPI data from New Zealand for the fourth quarter is out later today. It will be closely monitored and should be released. According to CPI, inflation will drop to 1.3% per quarter (down from 2.2% in Q3). Annualized, CPI is expected to fall to 7.1% from 7.2% in Q3. The Reserve Bank of New Zealand is like other major central banks and has raised rates by 325 base points to the current rate of 2.255%. The RBNZ doesn’t meet until February 22nd, giving it a few more weeks to digest economic data ahead of the meeting. Most likely scenarios include a rate hike of 75 or 50 basis points. Markets will begin to look for clues about the magnitude of the increase as the meeting draws closer. While some central banks such as the Fed or the Bank of Canada may suspend rate increases after the first rate increase of the year, the RBNZ won’t.

Is inflation at its peak? This is a key question that remains unanswered. Fuel prices declined in the fourth quarter thanks to a lower government fuel tax



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