REPEAT: RBNZ Preferred Core Infl Subdued Despite Headline Jump

Repeats Story Initially Transmitted at 02:24 GMT Oct 17/22:24 EST Oct 16

     SYDNEY (MNI) - Despite an acceleration in consumer price index inflation in

the third quarter, core inflation remained subdued, pointing to no change in the

Reserve Bank of New Zealand's firmly neutral monetary policy stance.

     Data published by the RBNZ Tuesday showed its preferred measure of core

inflation -- the sectoral factor model -- rose 1.4% y/y in Q3, the same pace as

Q2 -- which matched the lowest since Q3 2015.

     Data published earlier Tuesday by Statistics New Zealand showed headline

consumer inflation rose 0.5% q/q and +1.9% y/y which beat the MNI median

forecast and was also higher than the RBNZ's projection of +0.2% q/q and +1.6%

y/y.

     While headline consumer inflation is important because of the impact it has

on wage and price-setting behaviors, the RBNZ monitors measures of core

inflation which look through temporary volatility, permitting a clearer

assessment of inflationary pressure in the economy. 

     The RBNZ's sectoral factor model of core inflation separates components of

the CPI into tradables and non-tradables. By distinguishing between these two

sectors, the prices of which are widely regarded as being influenced by

different things, the model allows an interpretation of what is driving core

inflation, according to the RBNZ.

     The RBNZ data showed factor model inflation rose 1.8% y/y in Q3,

accelerating slightly from +1.7% in Q2. The factor model estimates the common

component of inflation from all the CPI classes for which data is available.

Ninety-six of the 105 classes currently in the CPI are included, according to

the RBNZ.

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