New Zealand Weekly Wrap: inflation in focus – ANZ

Analysts at Australia and New Zealand Banking Group (ANZ) offer a brief round-up of significant events that were reported from New Zealand this week.

Key quotes

“We learned this week that annual CPI inflation in New Zealand hit 7.3% in Q2 – higher than the RBNZ’s May MPS forecast of 7.0%, and our own forecast of 7.1%.” 

“The real news in the CPI data was the surge in domestic and core inflation measures. Annual non-tradable inflation hit a new record high of 6.3%, and core inflation indicators range between 4.8% and 6.1%. It’s a stronger and more persistent domestic inflation pulse than expected and prompted us to revise up our OCR forecast. We’re now expecting the OCR to peak at 4% by year-end (versus 3.5% previously).”

“We have updated our inflation forecasts in the wake of Q2’s data. While it’s looking like headline inflation may have peaked in Q2, inflation is likely to remain very high for quite some time. We are forecasting inflation will only drop below 3% at the end of next year. There’s still work to do for the RBNZ.”