The NZDUSD consumer prices rose by 1.4% q/q, taking the annual inflation rate to 5.9%, up from 4.9% in the September quarter. As expected, Covid disruptions, strong commodity prices, and wider global inflation contributed to a significant lift in tradable (imported) inflation (+6.9%)
In another place, profits in non-tradable or domestic inflation were especially strong driven by increases in construction prices, labor shortages, and transport costs.
Non-tradable inflation represents over half of all the items in the CPI basket. With little ability to influence tradable or imported inflation, the RBNZ will be aiming to slow down non-tradable inflation with rate hikes.
The RBNZ lifted the overnight cash rate twice in 2021 to 0.75%. As inflation is now almost twice the top of the RBNZ’s target band, there is little in the way to stop the RBNZ from lifting the overnight cash rate back to neutral at 2.5% by mid-2023.
Even though the higher inflation number and expectation of future RBNZ rate hikes, the NZDUSD has been taken hostage by this morning’s FOMC event, which has resulted in a solid bout of risk aversion across regional equity markets.
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