ASB: The Prospect Of Inflation Being Slow To Fall Below 3% Should Keep RBNZ Cautious

Ahead of today’s Q1 CPI print ASB write “our current add-up suggests annual inflation was steady at 7.2%, close to the highest since 1990. Surging food prices and rising prices from the housing group contribute more than half of the quarterly increase in the CPI, but generalised price rises should also be evident.”

• “Annual rates of tradable CPI inflation are cooling, but non-tradable and core inflation are expected to come in close to (or at) multi-decade highs. Despite growing downside risks, the prospect of inflation being slow to fall below 3% should keep the RBNZ cautious, with its least regret still hinging on doing too little on OCR settings rather than too much.”
• “We expect a further 25bp OCR hike in May and a 5.50% peak. High inflation will need to be conquered before OCR cuts are actively considered, and this looks to be a 2024 story.”