MNI: New Zealand Infl Expectations Ease Following Soft Q1 CPI

By Sophia Rodrigues

     SYDNEY (MNI) - Inflation expectations eased in the second quarter,

reflecting a slowing in consumer price index inflation, but two-year

expectations remained close to the middle of the Reserve Bank of New Zealand's

target band.

     Still, the data would worry the RBNZ and would likely support a hold for

longer monetary policy stance. 

     The Q1 consumer price index inflation data published by Statistics New

Zealand in April showed CPI rose 1.1% y/y, slowing from a 1.6% y/y rise in Q4. 

     The quarterly survey conducted for the RBNZ by The Nielsen Company and

published Tuesday showed a drop in one-year inflation expectation which took it

back to a level close to the outcome two surveys prior. Two-year expectations

declined a bit more, and closely matched the outcome seen two surveys before. 

     Long-term inflation expectations were little-changed above the 2% mark.

     The survey also published view on house price index which showed a marginal

rise in expectation for prices one year ahead, but a fall two years ahead.

Overall, the data continues to signal house prices are expected to rise at a

slow rate over the next two years.

                                          Q2     Q1

---------------------------------------------------

Inflation 2-year ahead (mean)          2.01%  2.11%

Inflation 1-year ahead (mean)          1.80%  1.86%

Inflation 5-year ahead (mean)          2.10%  2.09%

Inflation 10-year ahead (mean)         2.18%  2.05%

House Price Expectation 1-year ahead   2.74%  2.45%

House Price Expectation 2-year ahead   2.15%  2.52%

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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