New Zealand dollar steady as inflation miss leaves hawks unruffled
TLT•New Zealand consumer prices rose 0.7% in the third quarter and 3.7% year over year, slightly below forecasts, but markets fully priced a quarter-point Reserve Bank of New Zealand hike next week. The Australian dollar hovered near a three-week high as markets raised the implied chance of a November Reserve Bank of Australia hike to 64%.
1. New Zealand inflation and rates
New Zealand consumer prices rose 0.7% in the third quarter, slowing the annual inflation rate to 3.7% from 4.1%. Much of the slowdown reflected lower fuel prices, which have since rebounded; core inflation measures also remained high. Markets priced in a 100% chance that the Reserve Bank of New Zealand will raise its official cash rate by a quarter point to 3.0% on October 28. They also implied further tightening next year to at least 3.75%, above the bank’s 3.2% projection.
2. Australian rate expectations
The Australian dollar edged up to $0.7035 after four consecutive sessions of gains. Markets doubled the implied probability of a quarter-point Reserve Bank of Australia rate increase in November to 64%, after Deputy Governor Andrew Hauser said the inflation outlook was materially worse than projected. Rates are at 4.6% after four increases this year; third-quarter inflation data are due next week, and analysts expect core inflation to rise 1.0%.
