Bank views on NZ CPI: ASB: We expect....>

NEW ZEALAND: Bank views on NZ CPI: ASB: We expect the CPI to have lifted 0.4%*

qoq in Q1, with annual inflation a subdued 1%. Our forecast is weaker than the

RBNZ's inflation forecast published in the February MPS of +0.6% qoq, 1.1% yoy.

Despite still-strong housing-related inflation and a 10% lift in the tobacco

excise tax, underlying inflation pressures are expected to remain weak. Further

weighing on inflation in Q1 is the introduction of one year's free tertiary

education. With the annual CPI likely to fall back to the bottom of the

inflation band, the RBNZ will be feeling little rush to change policy settings.

However, we do expect inflation pressures to increasingly build over the coming

years and for the RBNZ to respond by lifting the OCR in August 2019.