Investing.com– New Zealand’s consumer price index fell more than expected in the second quarter, fueling concerns that the economy is cooling at a pace that could prompt the Federal Reserve to cut interest rates.

rose 3.3% year-on-year in the three months to June 30, government data showed on Wednesday. The reading was weaker than expectations for a 3.5% rise and a 4% augment in the previous quarter.

Quarter-on-quarter growth was 0.4%, below expectations of 0.5% and slower than the 0.6% growth in the previous quarter.

The lower CPI readings were mainly due to a slowdown in spending on discretionary and recreational goods, reflecting a decline in consumer spending due to pressure from high interest rates and relatively high inflation.

The CPI reading continued to be above the RBNZ’s annual target of 1% to 3% but is now likely to meet that target in the second half of 2024, according to the central bank’s forecast.

The RBNZ signaled at its July meeting that any rate cuts would be largely dependent on an easing in inflation. Wednesday’s reading bolstered bets that the central bank will now have enough confidence to start cutting rates later this year.

Westpac analysts wrote in a recent note that further signs of easing inflation could give the RBNZ enough confidence to start cutting interest rates as early as November.

The New Zealand dollar was slightly stronger after Wednesday’s reading, with the currency pair up 0.2%.