VIEW: ASB Has Consensus CPI Forecast But Sees Inflation Uncertainty

ASB is expecting Q4 NZ CPI to come in around consensus at 0.5% q/q and 4.7% y/y and below the RBNZ’s forecast at 0.8% and 5.0%. It expects both non-tradable and tradable eased in the final quarter of 2023. But there remains “plenty of uncertainty over the inflation outlook” and ASB doesn’t expect easing to begin until H2 2024.

• “Falls for food prices and selected consumer durables should deliver a broadly flat quarter for tradable prices. We will also be looking for signs of deceleration in core and non-tradable inflation (albeit from higher levels) in the Q4 outturn, providing the RBNZ with some reassurance that the extensive monetary tightening to date is gaining traction.”
• “The RBNZ will be wary of the risk of CPI inflation being stuck above 3% and will maintain restrictive OCR settings for as long as it takes to push inflation below 3% on a sustained basis.”
• “It would take a large deflationary shock for the OCR to move lower before the first half of 2024 and we expect a sequence of gradual OCR cuts to begin from the second half of this year (likely August). If, however, progress in lowering inflation stalls, OCR cuts could be delayed until 2025.”