The Reserve Bank of New Zealand (RBNZ) released its Sectoral Factor Model Inflation gauge for the third quarter of 2023 on Tuesday.

The inflation data arrived at 5.2% YoY in Q2 2023, dropping sharply from a 5.7% print recorded in Q2.

The official data published by the New Zealand Statistics (Stats NZ) early Tuesday, New Zealand’s Consumer Price Index (CPI) rose 5.6% YoY in Q3, much lower than the expected 5.9% increase in the reported period. In the second quarter, the country’s CPI rose 6.0%.

Both measures are closely watched by the RBNZ.

FX Implications

The Kiwi Dollar is under heavy selling pressure near 0.5900 after the release of the RBNZ inflation gauge. NZD/USD is trading 0.42% lower on the day at 0.5900, as of writing.

About the RBNZ Sectoral Factor Model Inflation

The Reserve Bank of New Zealand has a set of models that produce core inflation estimates. The sectoral factor model estimates a measure of core inflation based on co-movements - the extent to which individual price series move together. It takes a sectoral approach, estimating core inflation based on two sets of prices: prices of tradable items, which are either imported or exposed to international competition, and prices of non-tradable items, which are those produced domestically and not facing competition from imports.