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Writer's pictureEconomicstaan Official

New Zealand -Recent inflation trends and Central Bank updates

Updated: Nov 17, 2024

Many nations since the post-pandemic scenes, have been in the race to keep their inflation within their target range. It was a struggle, with the change in the global economic climate of trade, wars, and many international issues, that most of the nations failed to keep their economic fundamentals stable for a long time. In the second half of 2024, many fundamentals slowly started to stabilize, and one such aspect was inflation.

Central Bank's latest stance and future decisions

In the latest meeting of October ’24, the members of the committee have agreed to cut rates by 4.75 percent, which is in line to keep the inflation in check at the 1-3 percent range. The overall global economic climate is also in consideration since the demand is considerably slowed down. With the restrictive policy of New Zealand, financial activities such as investment and consumer spending, have seen a declining trend. This is more in tantum with the restrictive monetary policy stance followed by the committee.

With the recent policy of trade from China, New Zealand continues to feel the pinch in terms of trade. It did affect widely in terms of the exports and imports to China and also the Southeast Asian counterparts. Though the efforts have paid off in securing a better job market and a reasonable inflation trend, the hope for the nation to finish the year on a high note is a likely possibility.


Current situation of New Zealand's inflation

The inflation target range for the New Zealand central bank is currently at the range of 1-3 percent. It is considered the safe spot of inflation range, to keep the economy in the optimum functioning condition. Since the easing of the bank policy is said to have started way back in August ’24 by 50 bps, it is said to have shown some progress in cooling inflation. The quarterly inflation is 2.2 percent (Q3) compared to 3.3 percent, significantly higher than the previous quarter.

The consumer price index (CPI) is said to have increased by 0.6 percent, for the third quarter of 2024. This is giving all the more chances for the central bank to go in for a lot more cuts in the coming two months. With inflation likely to slow down as expected by the central bank, a mellowed stance is likely to be anticipated for the end of this year.  This could likely be a similar cut by 50 or an aggressive 75 bps cut to support the economy. More likely a cut in this direction is to help the labor market of the nation.

With the current promising trend of easing inflation, the target of 2 percent is most likely to be achieved by the first quarter of 2025.

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