Australia and New Zealand Monetary Policy Divergence Amid Stable Inflation

Australia’s inflation held steady in April, with the consumer price index rising 2.4% year-on-year, mirroring March’s pace and slightly exceeding forecasts. Core measures edged higher but remained within the Reserve Bank of Australia’s target band. The muted market reaction reflects the partial nature of the data, which skews toward goods rather than services.

Across the Tasman Sea, New Zealand’s central bank delivered a 25 basis point cut, reducing its benchmark rate to 3.25%. The RBA had previously cut rates to a two-year low, citing manageable inflation and global trade risks. ’The Reserve Bank is likely to deliver further monetary easing,’ said EY’s chief economist Cherelle Murphy, noting diminished inflation risks amid elevated global policy uncertainty.

Three-year bond futures held at 96.60 as traders priced in continued accommodation. The Australian dollar hovered NEAR US$0.6440, showing remarkable stability given the shifting policy landscape. Goods inflation registered just 0.9% annually, underscoring the disinflationary pressures permeating physical commodities markets.