RBNZ to react aggressively should inflation expectations fall further - ANZ

The Australian and New Zealand Banking Group (ANZ) analysts offer their outlook on New Zealand’s inflation and its implications on the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision.

Key Quotes:

“CPI inflation in the second quarter offered no surprises, coming in bang on ANZ and RBNZ expectations.

But the outlook for domestic inflation is bleak, with renewed slack in the economy set to drive annual non-tradable inflation lower. And the recent dip in inflation expectations poses a key risk to the inflation outlook.

While we estimate that inflation expectations will stabilize around the target midpoint of 2%, we would expect the RBNZ to react aggressively were surveyed inflation expectations to start to slide from here, so it’s worth keeping an eye on this data.”