VIEW: ASB write "consumer prices rose...>

NEW ZEALAND: VIEW: ASB write "consumer prices rose 0.1% qoq in the March quarter

(1.5 yoy), which was slightly below the ASB and RBNZ picks (+0.2% qoq, 1.6%

yoy), and the 0.3% market consensus. The gap between very low tradable inflation

and higher non-tradable inflation was wider than we thought, and emphasises the

two-speeded nature of the current expansion. Annual readings from the core

inflation measures produced by Statistics NZ continued to oscillate around 2%.

Looking through today's release, the key takeout is that inflation remains

contained. On the basis of today's CPI data, we view risks to the RBNZ's

estimate of core inflation from the sectoral factor model (1.7% yoy in 2018) as

being broadly balanced. Our view is that downside risks to the inflation outlook

have grown in recent months and the NZ economy looks increasingly unlikely to be

able to generate sufficient economic momentum that keeps CPI inflation

comfortably within the 1-3% inflation band. We expect 50bps of OCR cuts over

2019, with today's CPI print raising the odds of a May cut by the RBNZ."