Revised RBNZ two-year inflation expectations drop to 2.34% YoY, reducing bets on a September rate hike.
The New Zealand Dollar fell 0.45% to 0.5830 against the USD in European trading after the RBNZ lowered its two-year inflation expectations to 2.34% YoY from 2.53% in the prior quarter. The revision dampened market expectations for a 25bps rate hike at the central bank’s September meeting.
Earlier, traders had priced in a high probability of tightening, but softer inflation projections raised doubts. Mixed labor market data released earlier this week had little impact on the RBNZ’s hawkish stance, with TD Securities noting policymakers may still raise rates if economic activity continues recovering.
The USD held firm amid geopolitical tensions, adding pressure on the NZD. The RBNZ’s next move remains data-dependent, though the inflation outlook shift has already weighed on the currency.