ANZ: CPI, Relatively Good, Absolutely Bad

In the wake of Q1 CPI data ANZ note that “all up, these data mean the RBNZ will be heading into its second consecutive MPS with a downside starting point surprise for non-tradable inflation under the belt. That’s great news, but there are offsets: there could be more fiscal stimulus to lean against (we’ll know more on Budget day), and that the RBNZ may have more cyclone-related inflation to bake into their outlook (as signalled in the April Monetary Policy Review). So while markets may be chomping at the bit to price in cuts from late 2023/early 2024, we’re not convinced the Monetary Policy Committee will be eager to deliver them any time soon – inflation went their way today, but the war on high and sticky inflation is far from won. We continue to expect a 25bp hike at next month’s MPS. Today’s data is likely not enough to be seen by the RBNZ as warranting a pause, but it should rule out another 50bp hike.”