On April 20, New Zealand’s first-quarter inflation slowed more than economists expected, indicating that price pressures have peaked, and the New Zealand Federal Reserve may not need to continue to raise interest rates so aggressively.
The bank has been raising the official cash rate at a record pace to tame inflation, unexpectedly raising rates by 50 basis points this month to 5.25%, and suggesting the process may not be over yet.
Softer inflation data may not dissuade policymakers from raising interest rates by 25 basis points at their May meeting.
“That’s not bad for the RBNZ, but it needs to be careful that it’s concentrated in a few items, mainly tradables,” said Craig Ebert, senior economist at the Bank of New Zealand.
“The slowdown in the core indicators will be much smaller, so caution is still warranted. But it’s a step in the right direction.”