RBNZ: searching for inflation - ANZ

Analysts at ANZ explained that inflation expectations receded yesterday, which was unsurprising given the recent falls in petrol prices and headline inflation. 

Key Quotes:

"The 2-year ahead inflation expectations measure fell to 2.09% from 2.17%. While one can pick plenty of holes in the survey, the RBNZ will probably be happy that expectations have held broadly stable around 2%. 

In the past, the RBNZ has shown concern when expectations fall towards 1.6%, although there is a risk that expectations fall further from here given that headline inflation looks set to fall towards 1% (if not below) over the coming 12 months. 

Today, our Monthly Inflation Gauge for July will provide an early signal on Q3 trends. Prices in the Gauge rose a modest 0.1% m/m in June, with the underlying ex- housing measure rising by a similar magnitude. The latter is up just 0.9% y/y, which is clearly benign and – as was confirmed by the Q2 CPI figures – is showing a lack of broad-based price pressures. 

The RBNZ will certainly want to see broader inflation pressures before it even considers shifting off its ultra- neutral stance."