RBNZ Expects 2.3% Drop in New Zealand’s Q2 Inflation Rate

By Jose Resurreccion

May 13, 2024 03:51 AM EDT

RBNZ Expects 2.3% Drop in New Zealand’s Q2 Inflation Rate
The new $10 banknote on display at the Reserve Bank of New Zealand on September 1, 2015 in Wellington, New Zealand.
(Photo : Mark Tantrum/Getty Images)

The Reserve Bank of New Zealand (RBNZ) is expected to report another decrease in the country's inflation rate based on the latest monetary conditions survey provided last week. 

According to the central bank's latest Survey of Expectations, its two-year estimates for Q2 2024 fell slightly to 2.33% from Q1's rate of 2.5%, while its average one-year inflation expectations dropped from 3.22% last quarter to 2.73% this quarter. 

FXStreet reported that the New Zealand dollar (NZD) underwent renewed selling pressure after expectations of falling inflation rates, with the exchange between it and the US dollar losing 0.34% as of writing. 

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The RBNZ has been aiming to achieve and maintain an inflation rate of between 1% and 3% over the medium term, thus focusing on having an average rate of 2%. However, the inflation rate is directly related to the country's interest rates, which means that a high inflation rate would also mean a high-interest rate in an attempt to cool the economy. 

City Index added that a low inflation rate, which would also mean a low interest rate, could weaken the NZD, especially when exchanged with the US dollar. 

The movement for the NZD, also known as the "Kiwi," is also influenced by the performance of the Chinese economy, as both countries have very strong regional economic ties and domestic dairy prices, as the dairy industry is New Zealand's major export to the world. 

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