The analysis team at HSBC explains that the New Zealand’s rate of CPI inflation rose to 2.2% y-o-y in Q1, close to expectations (market expected 2.0%, HSBC forecast 2.1%) and up sharply from 0.4% just six months ago.
“This was the first reading of 2% or above since Q3 2011 and takes CPI inflation back to the RBNZ’s ‘near 2%’ target for the first time since then. Much of the increase has been driven by higher petrol and food prices, part of which will prove temporary. We expect this will be the peak in headline inflation for 2017.”
“Broader inflation pressures are rising, but more gradually, with the RBNZ’s preferred measures likely to remain below 2% for the next few quarters. We expect the RBNZ will remain cautious, but that rising underlying inflation pressure will prompt the central bank to begin lifting its policy rate in Q1 2018.”
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