New Zealand Q4 CPI inflation data shows high domestic inflation, RBNZ likely look through

The data from New Zealand is here, domestic inflation is high and sticky:

Which gave NZD/USD a boost:

ANZ analysis of the data, in brief:

  • Annual CPI inflation decelerated from 5.6% to 4.7% y/y in Q4, in line with
    our forecast, and below the RBNZ’s November MPS forecast of 5.0%.
  • While we were on the money with the headline, the details showed a
    downside surprise on the tradables side offset by a small upward surprise
    in non-tradable inflation. The RBNZ would have preferred the opposite.
  • Non-tradables inflation came in at 5.9% y/y, above our and the RBNZ’s
    forecast of 5.7% y/y. The surprise relative to our forecast looks to have
    been driven by the volatile household energy component, which the RBNZ
    is likely to look through.
  • The suite of core measures took a step down, boding well for the inflation
    outlook for the rest of the year.

ANZ expect an RBNZ rate cut in August this year:

  • The details of today’s data support our view that domestic-driven inflation
    pressures are easing, albeit a little more slowly than the RBNZ anticipated
    in November. The RBNZ has signalled intolerance for upside surprises, but
    we think there’s enough progress evident to satisfy the Committee that
    things remain on track. We continue to expect that core domestic disinflation will continue over 2024, allowing cuts from August

This article was written by Eamonn Sheridan at Source