The New Zealand dollar climbed to $0.591, nearing a six-week high, after stronger-than-expected inflation data strengthened expectations of tighter monetary policy. Consumer prices rose 3.1% year-on-year in the first quarter, matching the pace of the previous quarter and surpassing forecasts of a 2.9% increase. Inflation remains above the upper end of the RBNZ’s 1–3% target range.
Price pressures are expected to build further in the second quarter as the full impact of higher energy costs filters through, fuelling speculation that the central bank may raise interest rates earlier than previously indicated. Markets are now fully pricing in a rate hike in July. Even so, caution persists, as the economy is only just beginning to emerge from a prolonged downturn.
In separate data, business confidence fell in the first quarter to its lowest level since mid-2024. Firms reported plans to cut investment and reduce staffing as rising costs continue to squeeze profit margins.
