An increase in New Zealand inflation expectations damped bets on the central bank cutting interest rates as soon as next month and drove up the nation’s dollar.
The expected rate of inflation two years ahead rose to 1.85 percent from 1.8 three months ago, according to a survey of businesses and analysts published by the Reserve Bank of New Zealand in Wellington on Tuesday. The year-ahead expectation rose to 1.32 percent from 1.11 percent, the RBNZ said.
Governor Graeme Wheeler has said he would consider cutting the benchmark rate from 3.5 percent if near-zero headline inflation starts to weigh on the outlook and change price-setting behavior. The chance of a June cut fell below 50 percent on today’s survey from as high as 58 percent yesterday, according to swaps data compiled by Bloomberg. The kiwi dollar jumped more than half a U.S. cent to 74.36 cents.