New Zealand's Dollar was the top performer out of major currencies as a survey showed inflation in the country wasn't forecast to revert to the 2.0% target any time soon.

The Reserve Bank of New Zealand (RBNZ) inflation expectations survey revealed another steep fall in near-term inflation forecasts and a slight rise in longer-term expectations, indicating rates may need to remain higher for longer.

The New Zealand Dollar has been bolstered by improved sentiment in global markets since the Fed meeting last week showed it would be unlikely to hike rates again due to declining inflation and an economic growth slowdown.

Indeed, the market now forecasts up to 100 basis points of cuts by the Federal Reserve in 2024, Pound Sterling Live reports. This is in contrast to the RBNZ, which may have to hike interest rates again and not make a cut until 2025

"We're forecasting another rate hike from the RBNZ next year. Given the lingering strength in domestic inflation and inflation expectations, we don't think rate cuts will come onto the table until early 2025," according to Satish Ranchhod, Senior Economist at Westpac.

In addition, the Bank of England and European Central Bank are also forecast to slash rates next year, indicating all major central banks will start their cutting cycle ahead of New Zealand's central bank, which may result in an upside for the NZ Dollar in the coming months.

Inflation forecasts for one year ahead have experienced a steep drop, from 4.17% in the prior survey to 3.60%. At the same time, predictions for inflation in two years have fallen from 2.83% to 2.76%.

"The survey's respondents are more circumspect about the outlook for inflation further ahead. Expectations for inflation five and 10 years ahead have picked up and remain above 2%," Ranchhod added.

The RBNZ is set to hold the Official Cash Rate at 5.50% at its November meeting, yet there may be another rate rise in 2024, says Westpac: "We're forecasting another rate hike from the RBNZ next year."