WPAC on today's data - also a good bit of background on why this data point is important for the NZD

(ps. data here: NZ 2 year inflation expectations for Q1: 1.92% (prior 1.68%) )

(Bolding mine)

  • Inflation expectations are a perennial concern for the RBNZ as they have an important influence on how businesses adjust wages and prices
  • In recent years, the low level of headline inflation saw expectations fall to low levels.
  • Consequently, today's increase will have been a welcome development
  • This follows December's rise in headline inflation back above 1% for the first time in two years
  • The risk of expectations falling further was highlighted as a key concern in the RBNZ's last policy statement.
  • But while the risks around this part of the policy environment may have abated, headline inflation remains at relatively low levels.
  • In addition, the return to 2% will take some time with imported inflation expected to remain modest.
  • At the same time, increases in the population and the economy's productive capacity are allowing GDP to grow at a solid pace without a significant lift in domestic-led cost pressures

WPAC view on this week's meeting:

  • With this in mind we expect that the RBNZ will keep the OCR unchanged this Thursday when it releases its February Monetary Policy Statement. We also expect that they will retain the neutral stance of its November statement.