Will NZ CPI be back on target? - ANZ

Analysts at ANZ explained that New Zealand’s CPI inflation is expected to be there-or-thereabouts this morning, with market expectations at 0.8% q/q and 2.0% y/y (ANZ expects 0.7% q/q and 1.9% y/y), back at the midpoint of the target band for the first time since late 2011 (and that was influenced by an increase in sales tax).

Key Quotes:

"Job done; back to business as usual? The fact that the OCR is sitting at 1.75%, 75bps below the GFC level, despite a solid economic expansion, runaway house prices and severe labour shortages, suggests business as usual remains some time off. 

The CPI increase is being driven primarily by a now-rapidly-expiring lift in oil prices and food prices, as well as seasonal and base effects. Our own Monthly Inflation Gauge, which captures the gist of the key non-tradable inflation measure, continues to show that price increases outside of housing and construction are few and far between. 

The RBNZ was reasonably explicit in March that it is discounting the impact of “one-offs”. With the inflation pulse benign and core measures likely stable, the RBNZ is in no hurry to raise rates, relying on macroprudential measures to cool housing as it waits and watches."