New Zealand’s quarterly CPI reading came in slightly weaker than expected at 0.6% versus 0.7% in Q2 2024, bringing the annual inflation reading down from 3.3% to 2.2% – well within the central bank’s 1-3% target range.

This marks the slowest year-on-year pace of increase in price pressures since early 2021 and the first time the annual CPI figure returned to the Reserve Bank of New Zealand’s target band in over three years.

Link to New Zealand CPI Report (Q2 2024)

Components of the inflation report revealed that gains came from local authority rates and payments, vegetables and pharmaceutical products while lower prices were reported for petrol and early childhood education.

Market Reactions

New Zealand Dollar vs. Major Currencies: 5-min

Overlay of NZD vs. Major Currencies Chart by TradingView

The Kiwi, which saw a pickup in volatility an hour leading up to the CPI release, tanked upon seeing weaker than expected figures that boosted expectations of another RBNZ interest rate cut in their next meeting.

After a brief pullback from the initial reaction, the Kiwi resumed its drop to the post-CPI levels before moving sideways against majority of its counterparts, except against the Aussie.

From there, NZD pairs went on another wave lower versus its lower-yielding forex peers roughly a couple of hours after the CPI figures were printed while AUD/NZD diverged from the pack.