Analysts at TDS point out that New Zealand’s March quarter CPI jumped by +1.0%/qtr, a fraction higher than TD/mkt at +0.8% (although many were at +0.9%), but outsized increases in Food, Fuel and the (annual) excise tax increase drove the result.
“Due to a soft Q1 2016, annual inflation popped to 2.2%/yr, the first time the RBNZ under Governor Wheeler has ‘achieved’ the mid-point of its 1-3% target band.”
“Three months ago NZD OIS was 120% priced for a yearend hike, and this is now a more realistic 33%. We don’t see the Bank shifting to a hawkish stance until inflation expectations shift higher. The Bank’s near-term CPI profile will be lifted in the May Monetary Policy Statement but is unlikely to change over the medium-term.”