On Thursday, the New Zealand Bureau of Statistics released annual Consumer Inflation (Year-over-Year) data that increased from 4.9% to 5.9% in the fourth quarter of 2021. 

This increase is quite significant because it managed to exceed economists' expectations for growth of 5.7%. New Zealand's annual inflation growth was supported by a 7.6% rise in housing and utility household prices. 

In addition, the fuel prices jumped by 15 percent and food prices increased by 4.1% as well. Other sectors edged up and communications was the only sector to experience a decline in annual calculations.

But on a quarter-over-quarter basis, inflation slowed from 2.2% to 1.4%. Despite this, the achievement was still better than the projected decline to 1.3% made by some analysts. 

NZD/USD dropped after the Fed’s Announcement 

Overall, the New Zealand's inflation trend increased significantly throughout 2021. Statistics this morning also showed the rising trend beyond food and housing costs.

These were increased by 6.4% and 5.3% respectively. Unfortunately, the New Zealand's fairly impressive inflation data this morning failed to support the movement of the NZ Dollar against the US Dollar. 

The reason is, the impact of the Fed's policy announcement is stronger. That condition made the sell-off still dominates the NZD / USD pair. 

As of this writing, the NZD/USD weakened by 0.57% from the daily Open price and was trading in the range of 0.661 in the market. However, everything can be changed based on the further situations. 

Signals from the Fed about the Rate Hike in March

At last night's policy announcement, the Fed clearly signaled a rate hike in March, triggering a massive buyout of the USD. Moreover, the prospect of four Fed rate hikes this year triggers an impact. 

It makes the strengthening of the United States Dollar even more unstoppable. Commodity currencies such as the New Zealand dollar also had the worst declines.

Following the strengthening formed after the FOMC announcement earlier this morning, the USD added to the increase thanks to the release of US GDP data tonight (January 27). 

The U.S. Dollar Index rose 0.67 percent to 97.18 where it was their highest position since July 2020. The Amerixa's economic growth regained momentum in the last quarter of 2021. 

The Impact of the Inventory Accumulation Strong Push

The U.S. Commerce Department reported that Advance GDP jumped from 2.3% to 6.9% from the previous quarter. The gain was higher than the expectations of 5.3% made before. 

They are getting a strong boost from inventory accumulation, and that's driving growth. It was said by Sung Won Sohn, a financial expert at Loyola Marymount University in Los Angeles. 

So much money have been spent before. The Biden administration has stimulated the economy excessively and the Fed supports that effort.

Market is more Optimistic due to the Fed’s Tightening 

A day after the Fed's readiness to raise rates in March, the markets ramped up their expectations of the frequency of their rate hikes this year. After estimating four times, market participants now expect a five-fold increase.

Jerome Powell did confirm that a rate hike is needed by the America’s economy at this time. However, he also stressed that the Fed has not actually made any decision.

It is regarding on how many basis points of increase is needed. The chairman said only that the central bank would not rule out discussions on the matter.

Although the market had anticipated a rate hike, many people assumed that the Fed would become more sensitive to equity markets, when it actually wasn't. That was said by Jane Foley.

He is an analyst at Rabobank. That organization also mentioned that the balance sheet has stolen the attention of the market, especially ut stimulus withdrawals.