RBNZ Inflation Expectations Ease, NZD Under Pressure

The New Zealand dollar has been under pressure in recent days following the release of the Reserve Bank of New Zealand's (RBNZ) inflation expectations survey. According to the survey, two-year inflation expectations fell to 2.3% in Q3, down from 2.5% in the previous quarter. This move brings expectations closer to the central bank's 1-3% target band, suggesting that price pressures are moderating as the economy cools.

The decline aligns with recent data showing softer GDP growth and a softening labor market, which have prompted economists to predict that the RBNZ may begin cutting its official cash rate (OCR) as early as November. Currently, the OCR stands at 5.5%, a level held since May 2023.

The NZD traded around $0.5850 against the U.S. dollar, down 0.3% on the day. Traders are now pricing in a 70% chance of a rate cut in November, up from 50% a month ago, according to overnight index swaps.