As part of their NZ inflation data preview ASB express caution on the RBNZ outlook.
- Courtesy of stronger tradable prices we expect CPI inflation in the December 2019 quarter to deliver another modest upward surprise to the RBNZ.
- Much like the Q3 GDP print, however, the details should provide more reassurance to the RBNZ and we do not expect the Q4 CPI outturn to reveal an inflationary smoking gun.
- Core inflation outcomes are expected to remain clustered around 2%.
- We have pencilled in a 25bp OCR cut for 2020, but acknowledge that the odds of the OCR moving lower have reduced in recent months. With inflation seemingly entrenched close to the inflation target midpoint and the labour market looking well behaved, the OCR could stay at 1% for a while yet.
The RBNZ have been forthright with their comments about wanting inflation higher, but if ASB are correct on their outlook for CPI the Bank can indeed be patient.
NZ CPI data is due on January 24 local date, Jan 23 GMT 2145