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RBNZ survey shows medium-term inflation expectations easing

Inflation expectations one year ahead fell to 2.6% and two years ahead dropped to 2.3%, even as the RBNZ signals further rate hikes amid firm near-term inflation.

Reported · Written up by our desk · Central Banks

New Zealand’s Reserve Bank (RBNZ) survey of inflation expectations suggests medium-term price pressures are contained, even after recent spikes in energy prices and elevated near-term inflation, according to Action Forex.

In the RBNZ’s latest survey, inflation expectations over the next year fell sharply to 2.6%, from 3.4% in the prior quarter. Expectations for inflation in two years declined to 2.3%, down from 2.5% previously.

The report notes that while higher oil prices have pushed headline inflation above 4% and are likely to keep it elevated through the rest of this year, respondents do not view the current inflation uplift as enduring. It also says any increases in longer-term expectations for five and 10 years ahead fell within normal quarter-to-quarter volatility.

Action Forex adds that the RBNZ is still tracking a firm near-term inflation outlook, with core inflation at firm levels and operating-cost pressures highlighted by other business surveys. The outlet also points out that the RBNZ lifted the Official Cash Rate by 25 basis points in July and signaled further hikes, with forecasts of two more 25 bp increases likely at the September and December meetings.

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