VIEW: ANZ: Purchasing Power Under Attack

In the wake of the Q3 CPI print ANZ note that "the data continues to be buffeted by a mix of temporary factors (e.g. oil prices and council rates rises) and more persistent drivers (e.g. supply chain disruptions). But there's clearly a very strong underlying inflation impulse coming through as well, with some measures of core inflation rising over 4% y/y in September. For the RBNZ, today's data will only reinforce that hiking the OCR in early October was the right move. Underlying inflation is too high, and further removal of monetary stimulus is needed to get things back on an even keel. With lockdown creating downside risks to employment and growth, uncomfortable trade-offs could quickly emerge. But with inflation this strong, the RBNZ won't want to play fast and loose with their inflation-targeting credibility."