The Reserve Bank of New Zealand has released its Sectoral Factor Model Inflation gauge for the fourth quarter of 2024, coinciding with the latest Consumer Price Index (CPI) report from NZ Stats. The new inflation figure indicates a continued decline, reporting a 3.1% increase year-over-year for Q4, down from 3.4% in Q3 2024. The RBNZ closely monitors these inflation metrics as part of its strategy to maintain a targeted inflation rate of between 1% and 3%.
In the foreign exchange market, the Kiwi Dollar experienced a notable decline following the RBNZ’s inflation release. As of the latest data, the NZD/USD pair fell by 0.44% during the trading session, reaching intraday lows around 0.5650, reflecting investor reaction to the inflation trends.
The RBNZ’s Sectoral Factor Model Inflation uniquely focuses on two primary price categories: tradable and non-tradable goods. Tradable prices are those influenced by imports and global markets, while non-tradable prices are associated with domestically produced goods not subjected to foreign competition. This sectoral approach allows the RBNZ to assess core inflation more accurately by analyzing the interactions between different price movements.
Market dynamics continue to evolve with external factors also influencing the currency’s performance. Developments such as geopolitical tensions and discussions regarding tariff implementations are further complicating the economic landscape. For instance, recent threats of tariffs from US officials introduce additional uncertainty into trade relations, which could indirectly affect the performance of the New Zealand dollar in the global market.
Overall, as inflation trends show signs of easing, the RBNZ remains vigilant in its assessment of economic stability and potential impacts on monetary policy moving forward.
