Westpac On Declining NZ Inflation Expectations

Westpac notes the RBNZ job is not necessarily done despite the fall in inflation expectations:

"The drop back in expectations follows an easing in actual inflation, which is currently running at 6.7% (down from a peak of 7.3% last year). In addition, we are seeing increasing signs that domestic demand is responding to rise in borrowing costs over the past year."

But this doesn’t mean that the RBNZ’s job is done. Inflation remains elevated. And while expectations have softened, they remain above the 2% mid-point of the RBNZ’s target band.

The RBNZ will also be keeping a close eye on some other factors that might add to longer term inflation pressures. That includes the upcoming NZ Government Budget (out on Thursday 18 May) and the ongoing rapid rise in net migration."