ANZ note that “on the back of today’s CPI data and weaker activity indicators we have revised our OCR call. We now expect a 50bp hike in February and two 25bp follow-up hikes taking the OCR to a peak of 5.25%.”

• “CPI inflation remained strong in the December quarter, in line with our expectation, but below the RBNZ’s November forecast.”
• “Encouragingly, non-tradables inflation was flat at 6.6% Y/Y, below our forecast of 6.9%, and the RBNZ’s 7.0% expectation. And core inflation was encouraging as well. CPI ex-food, fuel, and energy did lift to 6.7% Y/Y (6.3% previously), but trimmed mean inflation eased to 6.1% (6.4% previously) and weighted median inflation was unchanged at 5.0%.”
• “Tradables inflation (largely imported) was stronger than expected, but that was thanks in part to a larger increase in international airfares than anticipated, and a smaller fall in petrol prices than implied by weekly fuel price data (small beer from the RBNZ’s perspective). Tradables came in at 8.2% Y/Y (8.1% previously) – a smidgen below the RBNZ’s expectation of 8.3%.”
• “Inflation is clearly still far too strong, but the stabilisation in non-tradables inflation is a welcome development. The inflation numbers clearly weren’t as bad as the RBNZ feared in November, and signs that inflation will ease meaningfully over 2023 are becoming increasingly clear.”