ASB note that "using a simple...........>

NEW ZEALAND: ASB note that "using a simple components-based approach our

analysis highlights recent developments in some of the key drivers of NZ

inflation. The lower NZD, higher oil prices, increases in fuel excise and the

minimum wage point to a lift in annual CPI inflation, which looks set to

approach 2% by the end of the year. There are gaps and limitations with our

analysis and there is the risk that the spill-overs from the spike in inflation

into broader prices and wages could be more significant than we have allowed

for. If inflation does prove to be stronger, the next 12 months will provide a

test for the medium-term focus of the RBNZ policy-makers and how symmetrically

they will treat the 1-3% inflation target. We expect a pick-up in RBNZ

communications over the coming months to remind wage and price setters that

expectations need to be consistent with the 1-3% inflation target. The RBNZ is

likely to wait to see evidence in the actual inflation data before deciding on

its course of action. Given the surprising persistence of low inflation since

the Global Financial Crisis, we expect the RBNZ to be understandably cautious

about acting pre-emptively."