‘With this in mind we expect that the RBNZ will keep the OCR unchanged this Thursday when it releases its February Monetary Policy Statement. We also expect that they will retain the neutral stance of its November statement’. – Westpac
New Zealand’s inflation expectations advanced markedly in the first quarter of 2017, the latest quarterly survey revealed on Tuesday. In a report, the Reserve Bank of New Zealand said two-year inflation expectations climbed to 1.92% in the first quarter, the highest level since 2014, from 1.68% in the preceding quarter. However, inflation is expected to remain below the Central bank’s inflationary target of 2%. The survey also showed that one-year inflation expectations that are less important for the Bank’s monetary policy advanced to 1.56% from 1.29% in the previous quarter. Inflation expectations are closely followed by the RNBZ, as they provide advance knowledge of future inflation. Inflation expectations remained low over the past several years amid low headline inflation. Nevertheless, Tuesday’s promising data combined with December’s rise in headline inflation above 1% suggest that inflation might actually improve in the upcoming months. However, analysts say that inflation is unlikely to return to 2% in the near term. Moreover, rapid population growth and the economy’s productive capacity put pressure on economic growth. After the release, the New Zealand Dollar rose from 67.90 to 68.72 against the Euro, from 58.65 to 59.02 against the British Pound.