Gold skeptics are from Mars, investors are from Earth

Annual consumers price index inflation is currently around the top of the Monetary Policy Committee’s 1 to 3 percent target band. However, with spare capacity in the economy, inflation is expected to return to around the 2 percent target mid-point over the first half of 2026. Economic activity through the middle of 2025 was weak. In part, this reflects domestic constraints on the supply of goods and services in some industries, and the impact of global economic policy uncertainty. Household consumption is recovering, partly because of lower interest rates, and elevated commodity prices continue to support the primary sector. House prices are flat, and residential and business investment remain weak. Economic growth in New Zealand’s trading partners is proving resilient, partly because of strong investment in AI-related activity, but is expected to slow in 2026. There are upside and downside risks to the inflation *NZ CUTS BENCHMARK INTEREST RATE BY 50BPS TO 2.5%; EST. 2.75% *RBNZ: OPEN TO FURTHER RATE REDUCTIONS AS REQUIRED RBNZ higher short inflation could prove to be more persistent Reserve Bank of New Zealand Reports Weak Economic Activity Into Mid-2025