BNZ: Inflation To Surprise?

BNZ note that “the long and the short of it is we are struggling to see how the RBNZ’s forecast of a 1.7% quarterly increase in the Q4, 2022 can CPI be achieved. At this stage we are picking 1.3%.”

• “In the recent past, if the RBNZ has “missed” on its CPI projection it has adjusted its monetary policy stance immediately. To be consistent with recent past behaviours this would mean the RBNZ should moderate its forward interest rate track. Indeed, it should mean it backs off 75 basis points at the February 22 meeting and settle on 50.”
• “Will the RBNZ be symmetrical and consistent with their behaviours? Only time will tell.”
• “In short, we are fairly confident the Q4 CPI print will come in below the RBNZ’s forecasts. But what we are less confident about is how the RBNZ will respond to such especially if core measures of inflation remain elevated.”