New Zealand inflation hits 4.1% in Q2, fueling RBNZ rate hike bets and lifting the NZD against a muted USD.
The NZD/USD pair rose to 0.5810 in early European trading, supported by expectations of further Reserve Bank of New Zealand rate hikes. New Zealand’s annual CPI inflation reached 4.1% in Q2, a two-year high, up from 3.1% in Q1.
Markets now price in at least two more rate increases this year, pushing the Official Cash Rate to 3.0%. The Federal Reserve held rates steady at 3.5%-3.75% but disappointed hawkish expectations, with three policymakers voting for a 25-basis-point hike.
ING strategists noted the Fed’s stance lacked a strong policy signal, muting the dollar’s reaction despite Fed Chair Kevin Warsh’s warning of quick action if inflation accelerates.