NZ Inflation Expectations Plunge to Multi-Year Low Amid Japan's Persisting PPI Pressure

New Zealand's inflation expectations have hit a multi-year low, falling to 2.5% in the first quarter of this year, according to the Reserve Bank of New Zealand. This marks a decline from 2.8% in the previous quarter and brings expectations closer to the central bank's 1-3% target band.

The drop is attributed to softer domestic demand, falling commodity prices, and the lagged effects of the RBNZ's aggressive rate hiking cycle. The Reserve Bank has held the official cash rate at 5.5% since mid-2024, and markets are now pricing in a potential rate cut later this year as inflation cools.

However, Japan's producer price index continues to climb, rising 3.2% year-on-year in January, up from 2.9% in December. This marks the highest reading since mid-2023 and is driven by rising energy costs, a weak yen, and supply chain disruptions.