VIEW: BNZ expect that "Q2 CPI will......>

NEW ZEALAND: VIEW: BNZ expect that "Q2 CPI will increase 0.5% q/q. This is

partly as fuel prices rebound from their drop in Q1. Such an outcome would nudge

CPI up to 1.6% y/y in Q2. Our view is fractionally under the exp. of the market,

and the RBNZ, namely 0.6% q/q & 1.7% y/y. For the record, we held the same view,

before last week's Food Price Index for June fell as much as it did, on weakness

in things like biscuits & tomatoes that looked to be transitory. Issues of

measurement are also highlighted by the new housing rental price index. The new

index has been showing higher inflation than the incumbent rent measure.

Back-casting this into the CPI is not an option (as the CPI is never meant to be

revised). However, the new rent price index will provide a more accurate

inflation measure going forward. As for New Zealand's various core inflation

measures, will reckon these will remain around or just below the 2% annual mark.

Nonetheless, we doubt the RBNZ is in a mood to wait and see where (core)

inflation might be trending to. With near-term headline CPI & GDP outcomes

likely to look a bit shy of "ideal", the Bank looks set to cut its OCR again in

August, while considering the case for further easing after that."