New Zealand Inflation Eases, Opening Path for Big Rate Cuts
The inflation rate ran at an annual pace of 2.2% in the quarter compared with a rise of 3.3% in the second quarter
2 min
SYDNEY—New Zealand’s inflation rate returned to within the central bank’s target band for the first time since early 2021 in the third quarter, opening a path to more supersized interest-rate cuts in coming months.
The inflation rate ran at an annual pace of 2.2% in the quarter, near the midpoint of the desired 1% to 3% target band, with some economists warning that the Reserve Bank of New Zealand must continue lowering the official cash rate at speed as a neutral policy rate is still well off in the distance.
The annual increase in inflation compares with a rise of 3.3% in the second quarter, StatsNZ said Wednesday. Inflation rose by 0.6% in quarterly terms.
The inflation data justifies the 75 basis points of cuts announced so far since August, with the RBNZ stepping up the pace of lowering the official cash rate last week by joining the Federal Reserve in slashing by 50 basis points.
Economists warn that there is a risk that inflation will undershoot the target band in coming quarters, especially if the RBNZ backs away from more significant cuts.
The official cash rate has so far fallen to 4.75% from 5.50%, with a neutral policy rate likely closer to 3.00%, according to economists.
New Zealand’s farm-rich economy has been in and out of recession for years as the RBNZ proved to be one of the more aggressive central banks globally when combating the inflation surge that emerged after the Covid-19 pandemic.
Economic activity remains flat and in need of resuscitation, especially with growth in China, its main trading partner, in a slowdown, economists said.
Higher rents were the biggest contributor to the annual inflation rate, up 4.5%. Almost a fifth of the annual increase in the consumer-price index was due to rent prices.
Prices for local authority rates and payments increased 12.2% in the 12 months to the third quarter, StatsNZ said. Prices for cigarettes and tobacco also rose sharply in line with an annual excise-tax increase.
Still, lower prices for gasoline and vegetables helped to offset rising prices, StatsNZ added.
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Australian shares fell on Thursday as Wall Street weakness, rising oil and persistent rate concerns weighed on most of the market. The S&P/ASX 200 declined 0.72 per cent to 8,702. The All Ordinaries lost 0.66 per cent to finish at 8,897. Mining stocks were hit particularly hard, while real estate also dragged on the index. …
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Borrowers cannot control the Reserve Bank, but they can control how exposed their household budget is to its next decision. The RBA meets on 29 September with inflation concerns still elevated and major-bank economists increasingly bringing forward their rate-rise calls. Fixed mortgage rates have also been moving, reducing the value of waiting for perfect certainty. …
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2 minAustralian shares fell on Thursday as Wall Street weakness, rising oil and persistent rate concerns weighed on most of the market.
The S&P/ASX 200 declined 0.72 per cent to 8,702. The All Ordinaries lost 0.66 per cent to finish at 8,897. Mining stocks were hit particularly hard, while real estate also dragged on the index.
Energy was the notable exception, gaining more than one per cent as Brent crude traded above US$103 a barrel. Oil had moved higher amid uncertainty surrounding potential US diesel-export restrictions and broader geopolitical supply risks. The move supported energy producers but renewed concern about inflation inputs across transport and the wider economy.
Gold shares were weak even as spot bullion remained historically elevated. The All Ordinaries Gold index fell about 2.25 per cent, showing that equity performance can diverge from the commodity because of valuation, currency, operating and company-specific factors.
Zip was a prominent loser, falling 11.38 per cent after the company reported short sales after the previous close. Nine Entertainment also weakened after UBS analysts warned of near-term revenue challenges associated with its advertising-supported subscription tier.
Premier Investments led larger winners despite caution about the retail environment. Breville, in which Premier owns a significant stake, also appeared among leading movers. In the broader ASX 300 screen, Myer gained 11.43 per cent and MAAS Group rose 7.93 per cent, while Lotus Resources fell 10.53 per cent. These percentage moves should be checked against company announcements and trading liquidity before attributing causes.
The Australian dollar was broadly flat at US70.38 cents. Spot gold was around US$4,280 an ounce, Brent crude approximately US$103.08 a barrel and iron ore near US$96.90 a tonne late in the session.
The rate outlook remains the central domestic catalyst. Labour-market weakness has not eliminated the possibility of an RBA increase next week, leaving banks, listed property and other rate-sensitive sectors exposed to changing expectations.
Market dashboard
S&P/ASX 200: 8,702, down 0.72 per cent.
All Ordinaries: 8,897, down 0.66 per cent.
Best sector: Energy, up more than one per cent.
Weakest areas: Real estate and materials were the major drags; confirm final sector percentages before publication.
Material winner: Premier Investments led the large-company gainers. Confirm its final closing move from the ASX before publication.
Material loser: Zip, down 11.38 per cent.
ASX 300 percentage leader: Myer, up 11.43 per cent.
ASX 300 percentage laggard: Zip, down 11.38 per cent.
AUD/USD: Approximately US$0.7038, broadly flat.
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