Food prices in New Zealand fell by 0.4% in November compared with the previous month. However, they are still 4.4% higher than a year ago and therefore continue to pose a problem for the central bank. If it were only food prices, one could perhaps overlook this and refer to core prices, Commerzbank's FX analyst Volkmar Baur notes.

Core price trends keep pressure on RBNZ

"However, the trend here has not been much better in recent months. Of course, it should be noted that in New Zealand, only a portion of the prices in the CPI basket are surveyed on a monthly basis. However, these price indications were also a reliable indicator for the complete CPI, which is surveyed once a quarter. And so it still looks as if inflation will remain at around 3%, at the upper end of the central bank's target range."

"It remains to be seen how the Reserve Bank of New Zealand will deal with this. In interviews over the past few days, the new governor, Anna Breman, emphasised that the key interest rate could remain unchanged if the economy develops as currently expected. However, she also said that financial conditions had already tightened somewhat more than expected three weeks ago."

"The RBNZ's next monetary policy meeting will not take place until 18 February next year. This gives the new governor plenty of time to calmly assess developments. We continue to assume that the economy in particular will develop somewhat weaker than currently expected by the central bank and therefore continue to anticipate a further reduction in the key interest rate."