Inflation expectations remained contained in the RBNZ’s latest survey. High oil prices and elevated near-term inflation don’t appear to have boosted medium-term inflation expectations.
RBNZ inflation expectations survey
- 1 year ahead: 2.60% (Prev, 3.41%, down 81bps)
- 2 years ahead: 2.34% (Prev: 2.53%, down 19bps)
- 5 years ahead: 2.31% (Prev: 2.22%, up 9 bps)
- 10 years ahead: 2.20% (Prev: 2.19%, up 1 bp)
Expectations for inflation over the next couple of years have dropped back in the RBNZ’s latest survey of professional forecasters and selected businesspeople.
Expectations for inflation one year ahead fell to 2.60%, down sharply from 3.41% last quarter.
Similarly, the closely watched measure of inflation in two years’ time fell to 2.34% (down from 2.53% previously).
This will be welcome news for the RBNZ. With the rise in oil prices in recent months, inflation has risen to over 4%, and it’s likely to remain elevated for the remainder of this year.
But despite such pressures, respondents to the RBNZ’s survey do not expect the current uplift in inflation to be enduring.
We did see some rise in expectations for longer term inflation (five and ten years ahead), but those increases are well within the normal quarter-to-quarter volatility we typically see.
All of the measures of expected inflation are either at or slightly below where they were six months ago, before the Iran conflict.
Implications for the RBNZ
While expectations remained contained in today’s survey, the RBNZ is still looking at a firm near term inflation outlook, with core inflation at firm levels even before the Middle East conflict. In addition, other business surveys point to ongoing pressures on operating costs.
The RBNZ hiked the Official Cash Rate 25bps at their last policy meeting in July and signalled further hikes over the coming months. We’re forecasting two more 25bp hikes this year, most likely at the RBNZ’s September and December meetings.
