NEW ZEALAND: Steady Inflation Expectations, August Cut Likely
Q3 inflation expectations were stable in the RBNZ’s survey of forecasters, economists and industry leaders. 1-year ahead they remained at 2.4%, while 2-years ahead at 2.3% - both within the 1-3% target band but remaining above the mid-point. 1-year troughed at 2.1% in Q4 2024 while 2-year in Q3 2024 at 2.0%. With expectations stable, its measure of core moderating 0.1pp to 2.8% in Q2, wage inflation heading towards 2% and economic growth remaining lacklustre, the RBNZ seems likely to cut rates 25bp to 3% on August 20.
- Monetary conditions are expected to be less tight at the end of Q3, while they are believed to be easier in Q4 at -22.5 from -7.3. In terms of a year out, they are thought to still be accommodative but less than expected last quarter.
- Q3 household inflation expectations are released on August 14. They tend to be higher than the survey of forecasters results.
NZ inflation vs inflation expectations %
Source: MNI - Market News/LSEG
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JGBS AUCTION: 5-Year JGB Auction Results
The Japanese Ministry Of Finance (MoF) sells ¥1,825.3bn 5-Year JGBs:
- Average Yield: 0.989% (prev. 0.982%)
- Average Price: 100.05 (prev. 100.08)
- High Yield: 0.993% (prev. 0.993%)
- Low price: 100.03 (prev. 100.03)
- % Allotted At High Yield: 6.9288% (prev. 73.3986%)
- Bid/Cover: 3.5411x (prev. 4.5783x)
RBNZ: MNI RBNZ Preview-July 2025: Likely On Hold
- The sell-side consensus is for the RBNZ to remain on hold tomorrow, which is also consistent with market pricing. There are some sell-side forecasters looking for a rate cut tomorrow, whilst most of those who see the RBNZ on hold, see risks of further cuts as we progress through 2025. For this meeting, our own bias is for the central bank to hold policy rates steady.
- Recent inflation outcomes arguably provide the strongest signal that the RBNZ should hold pat at tomorrow’s policy meeting outcome. Further on the inflation front was a tick up in inflation expectations for Q2. We are coming off a low base (just up from 2%), but the central bank may want to see Q3 trends (this data gets released on Aug 7) before drawing further conclusions as to whether trends are shifting or not.
- In contrast, growth indicators are still arguing for easier policy settings. The central bank is likely to be comfortable to preserve policy space at this juncture and assess upcoming inflation trends. It is likely to leave the door ajar for further policy support given headwinds to domestic growth.
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JGBS AUCTION: 5Y Supply Faces A Similar Yield & Curve
The Japanese Ministry of Finance (MoF) will today sell Y2.4tn of 5-Year JGBs. The MoF last sold 5-year debt on 19 June 2025.
- Yields on today’s offering are around last month’s issuance levels but remain 25bps below the cycle peak.
- The 2s/5s yield curve is little changed since last month and sits just below its cycle peak.
- Amid mixed to weak demand at recent auctions, today’s results will be closely watched for signs of continued softness.
- Results are due at 0435 BST / 1235 JST.
