NZ: Inflation expectations edged down in Q3 - Westpac

The New Zealand Reserve Bank’s inflation expectations survey, which asks respondents what they think inflation will be in two years’ time, fell from 2.17% to 2.09%, notes Dominick Stephens, Research Analyst at Westpac.

Key Quotes

“The interesting thing here is not that expectations fell, but that they failed to fall further. Inflation expectations jumped sharply in June, but that was dismissed as a product of a surprisingly high actual inflation figure that had printed shortly beforehand. This quarter, we observed a very weak actual inflation print, so we might have expected inflation expectations to fall further. Thus today’s data represents a minor upside surprise to the RBNZ.”

“The bigger picture is that a range of New Zealand’s short-term inflation expectations surveys, including the RBNZ measure, have stepped up over the past nine months. Meanwhile, long-term inflation expectations are sitting very comfortably close to 2%. All of this will give the Reserve Bank comfort that it is on the right track to returning inflation to 2% on a sustained basis.”