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NZ Dollar Slips as Inflation Fails to Shift Rate Cut Bets

NZ Dollar Slips as Inflation Fails to Shift Rate Cut Bets

The New Zealand dollar declined to around $0.591 on Thursday, ending a six-day winning streak as investors remained focused on the likelihood of further monetary easing, despite an uptick in inflation. The dip came amid a stronger U.S. dollar and cautious remarks from Federal Reserve Chair Jerome Powell.

New Zealand’s annual inflation rate rose to 2.5% in the first quarter of 2025, slightly above the market forecast of 2.3% and up from 2.2% in the previous quarter. While the figure surprised slightly to the upside, it remains comfortably within the Reserve Bank of New Zealand’s (RBNZ) 1–3% target range, easing concerns of an imminent policy shift.

Market participants interpreted the data as insufficient to derail expectations of further interest rate cuts. Traders remain fully priced for a 25 basis point reduction at the RBNZ’s next policy meeting in May. Projections also indicate rates could reach a low of 2.75% by the end of the year.

The kiwi also weakened due to broader U.S. dollar strength after Fed Chair Powell stated that the central bank would need additional data to determine the direction of interest rates. His comments reinforced expectations that the Fed is in no rush to ease policy, further supporting the greenback.

Overall, while inflation ticked higher, it has not shifted the RBNZ’s dovish outlook, leaving the New Zealand dollar vulnerable to both domestic monetary policy and global macroeconomic shifts.

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