The New Zealand dollar took a steep dive yesterday afternoon after the Reserve Bank published a survey showing inflation expectations for the next two years were steady.
The survey backed up views interest rates will remain on hold in the near future.
The kiwi fell to US70.5c from
Monday's close of US72.27c before closing at US70.6c.
The Reserve Bank's quarterly survey of expectations showed business managers expected annual inflation to average 2.7 per cent over the coming year, unchanged from the previous survey in May.
Two-year inflation expectations were also steady at 2.6 per cent.
An analyst said the data was likely to keep the central bank cautious.
"People are expecting headline inflation to remain toward the top of the Reserve Bank's target band for some time to come," said Daniel Wills, economist at ASB Bank. The RBNZ is required to keep annual inflation between 1 per cent and 3 per cent on average over the medium term.
The RBNZ has lifted interest rates four times this year to a record 8.25 per cent on concerns over growing inflation pressures, but said at its last rate view in July it did not expect to raise rates further as it saw signs of an easing in domestic borrowing.
All 17 economists in a Reuters poll expect the RBNZ to keep rates on hold for the rest of the year.
The 70 business managers surveyed also expect the consumer price index to rise 0.7 per cent in the September quarter, to be 1.9 per cent higher than a year earlier.
In May, they had also forecast a quarterly rise of 0.6 per cent. In the June quarter, consumer prices rose 1 per cent on the previous quarter for an annual rate of 2 per cent.
- Reuters
