Inflation in New Zealand slowed more than expected in 2Q24, and it is cooling faster than expected, UOB Group economist Lee Sue Ann notes.

Inflation cools down faster than expected

“Inflation in New Zealand slowed more than expected in 2Q24, to its weakest in three years. CPI rose 0.4% q/q in 2Q24, a tad lower from the 0.6% q/q reading in 1Q24. Compared to the same period a year ago, CPI eased to 3.3% y/y, from the 4.0% y/y reading in 1Q24.”

“Non-tradeable inflation, a closely watched indicator of domestic price pressures, also eased to 0.9% q/q from 1.6% q/q in 1Q24. Compared to the same period a year ago, non-tradable inflation came in at 5.4% y/y in 2Q24, compared to the previous reading of 5.8% y/y.”

“While inflation remains above the RBNZ’s 1%-3% target band, it is cooling faster than expected. This, alongside weakening momentum in the domestic economy, should provide some impetus for the central bank to begin easing later this year. We are currently maintaining our view for the first rate cut to occur in 4Q24 (Nov).”