NZ: Broad-based inflation pressures lacking - ANZ

Analysts at ANZ explain that New Zealand’s CPI inflation was stronger than expected in Q3, boosted by temporary factors, but underlying the strong print, broad-based inflation pressures are lacking.

Key Quotes

“The RBNZ has made it clear that it needs to see core inflation at or above the target midpoint. And for that to be realised, non-tradable inflation needs to see a decent tick-up, which we suspect may be difficult to achieve.”

“The stronger Q3 CPI print presents a communication challenge for the RBNZ, but we expect the Bank will maintain a dovish tone at the November MPS in light of a still-modest underlying pulse and downside activity risks, which may come as a surprise to markets.”

“We continue to see the OCR on hold for the foreseeable future, with risks skewed to the downside. On the other hand, we are mindful of upside inflation risks, as highlighted in the RBNZ’s upside MPS scenario – but in our view that scenario is still a long way from being a reality.”