Employment is likely to be key to any future RBNZ moves – Westpac


Following the upbeat release of New Zealand’s fourth quarter (Q4) CPI data, analysts at Westpac anticipate the Reserve Bank of New Zealand (RBNZ) to emphasize more on their other mandate concerning employment for fresh impulse.

Key quotes

Consumer prices rose by 0.5% in the December quarter – a relatively large increase for this time of the year, which is typically weighed down by seasonal price declines. The annual inflation rate rose from 1.5% to 1.9%, returning to where it was at the end of 2018.

The result topped our forecast of a 0.4% rise, as well as the 0.2% increase that the Reserve Bank expected in its last Monetary Policy Statement.

In both cases, the upside surprise was on the tradables side of the CPI, which rose by 0.4% for the quarter (0.1% annual). Non-tradables prices were as expected with a 0.6% rise, with the annual pace dipping slightly to 3.1%.

Today’s result will be a modest positive surprise for the RBNZ and reinforces our expectation for no-OCR cut over the first half of 2020. 

With inflation on track to be comfortably within the target range over the next year, the RBNZ’s other mandate – supporting maximum sustainable employment – is likely to be key to any future monetary policy moves.

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