The Reserve Bank of New Zealand (RBNZ) Survey of Expectations due today can be a NZD mover ...Middle East

The upcoming release is scheduled for today, Thursday 13 February 2025 at

0200 GMT, 2100 US Eastern time

One-year-ahead inflation expectations: Decreased from 3.60% to 3.22%.Two-year-ahead expectations: Fell from 2.76% to 2.50%.

These downward trends suggest that those surveyed expected inflation to move closer to the RBNZ's target range of 1 to 3 percent. The forthcoming February 2025 survey will provide updated insights into these expectations, reflecting recent economic developments and policy changes.

Higher-than-expected inflation expectations → May strengthen NZD as it lessens the likelihood/magnitude of interest rate cuts. Currently the RBNZ is expected to cut by 50bp at its meeting next week. likely the final 50bp interest rate cutLower-than-expected inflation expectations → Can weaken NZD as it suggests a more dovish RBNZ and potential for/magnitude of future rate cuts.

The survey isn’t as high-impact as CPI data or an RBNZ rate decision, but larger-than-expected shifts in inflation expectations can still move markets, especially if they contradict RBNZ’s own projections.

Current Market Context:

Monetary Policy: In response to moderated inflation and economic contraction, the RBNZ has reduced the Official Cash Rate (OCR) by 125 basis points since August 2024, bringing it to 4.25%. Further cuts are anticipated, with markets pricing in a 70% probability of a 50-basis-point reduction on 19 February 2025.

This article was written by Eamonn Sheridan at www.forexlive.com.

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