Global Interest Rates Push NZ TWI to 2020 Lows
New Zealand's Trade-Weighted Index (TWI) has fallen to its lowest level since March 2020, reaching a value of nearly 65. This decline is adding pressure to inflation expectations in New Zealand.
The TWI has been affected by the global trend of rising interest rates, which have caused the US 10-year Treasury yield to reach its highest level since 2007 at 5%. European curves are also steeper, with the UK 30-year rate trading as high as 5.95%, approaching the 6% mark and its highest level since 1998.
The rise in global interest rates has weighed on global equity markets, with the S&P 500 down by half a percent and the Euro Stoxx 600 index closed down 0.3%. The decline in risk sentiment has also led to a weak performance from the New Zealand dollar, which remains around 0.5760.
The impact of higher oil prices on inflation is expected to be significant, with the price of Brent crude sitting near USD109 per barrel and CPI inflation forecasted to pick up to 4.2% for the December quarter.