New Zealand’s inflation rate is no longer falling. The annual inflation rate rose to 3%, hitting the top of the Reserve Bank of New Zealand’s target band and marking a 15-month high, up from 2.7% previously.
Because this increase was in line with forecasts, it is unlikely to stop the RBNZ from cutting rates further.
Markets expect the central bank to lower the Official Cash Rate once more next month, its final decision of the year, bringing it to 2.25%.
However, there is a risk that lower rates could overstimulate inflation. That tension is possibly reflected in the New Zealand dollar. The NZD has possibly found support as traders weighed the possibility that this might be the last in the current cycle. On the chart, NZDUSD has bounced from the 0.5650 area, its lowest since early 2024, before recovering toward 0.5740.
If inflation remains sticky and the RBNZ turns more cautious, the kiwi could strengthen back toward 0.5850. But if economic data continue to deteriorate and rate cuts proceed as planned, renewed weakness toward 0.5600 or lower remains a possibility.
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