ANZ On CPI

Ahead of today’s Q1 CPI print ANZ expect “annual CPI inflation to remain steady at 7.2% in Q123, a touch below the RBNZ’s February MPS forecast of 7.3%.”

• “Underpinning that is an expectation that annual non-tradables inflation (aka domestic inflation) will accelerate from 6.6% in Q4 to 6.8%, and annual tradables inflation will slow from 8.2% to 7.4%.”
• “If our expectation is correct, annual non-tradable inflation will come in 0.3%pts below the RBNZ’s February MPS forecast. However, we’re not convinced a ‘miss’ this size will have much bearing on the RBNZ’s broader strategy. Markets may disagree with this assessment on the day, but the RBNZ did signal a potential upgrade to their inflation outlook in the April Monetary Policy Review, owing to larger cyclone impacts and the potential for further fiscal expansion.”
• “Our forecast is for a follow-up 25bp OCR hike at the May MPS, taking the OCR to 5.5%, which appears to be the Committee’s ‘happy place’, where they can ‘watch, worry and wait’.”