VIEW: BNZ write "we should get a........>

NEW ZEALAND: VIEW: BNZ write "we should get a taste of CPI robustness, compared

to RBNZ exp. we exp. quarterly inflation of 0.4%. This would set the annual

inflation rate at 1.8%, from 1.9% in Q4. The market's median exp. is +0.3% &

+1.7% respectively. The February MPS foresaw +0.2% for the Q1 CPI & 1.6% y/y. To

be sure, some of the upside we see for the Q1 CPI relates to the rebound in fuel

prices. However, also note we are picking that non-tradables inflation firmed to

an annual pace of 3.0% in Q1, from 2.7% in Q4, whereas the Bank is looking for

2.8%. This gives a sense of where we see the directional bias to the core

inflation measures for Q1. Speaking of which, recall that the Bank's sectoral

factor model of CPI inflation produced surprising steadiness in Q1, namely 1.7%

y/y. CPI ex-food and energy was running at 1.5% y/y. Perhaps these are what the

RBNZ Governor, Adrian Orr, was referring to when he stated in his interview with

Bloomberg last week that inflation was "below target". His comments gave a sense

of bias in interpretation. We would argue that CPI inflation is comfortably

ensconced close to the middle of the 1.0 to 3.0% target band, bolstered by the

range of core inflation estimates, along with various business survey pointers."