Latest Reserve Bank of New Zealand forecast from New Zealand bank ASB, in response to today's Q3 inflation data from NZ

  • ASB say today's Q3 inflation report shows CPI in line with RBNZ forecast
  • Wheeler (RBNZ governor) is more concerned with the housing market, his preference is to leave room to cut rates if global economy slows significantly
  • Tradable inflation was stronger than expected. Prices increased in some areas due to the stronger NZD and in other areas due to less discounting. A key uncertainty over the next 12 months is to what extent the recent sharp fall in the NZD will impact retail prices of imported goods. The evidence in Q3 is likely to support the RBNZ's view of quite a significant lift in tradables inflation. We are still less convinced - especially as the recent rebound in the NZD provides a window of opportunity for importers to hedge.
  • Non-tradable inflation is a mixed bag. . housing-related costs continue to be the sole source of inflation. The annual increase in council rates also featured in Q3. Meanwhile, housing construction costs continued to lift strongly in Auckland and Canterbury. Rents also continue to steadily lift
  • Excluding housing, non-tradable inflation remains incredibly muted
  • Of concern for the RBNZ is the trend decline in seasonally-adjusted non-tradable inflation. Over 2014 seasonally-adjusted non-tradable inflation was running at 0.5/0.6% per quarter. This has now slowed to 0.2/0.3% per quarter
  • With growth set to slow over 2015 and 2016, we don't expect non-tradable inflation to pick up meaningfully without further stimulus