NZ CPI: no trigger to cut – TDS

Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, is expecting an above-consensus +0.5%/q lift in NZ prices in Wednesday's March quarter CPI report, leaving the annual inflation rate at 1.9%/y.

Key Quotes

“The RBNZ’s February projection assumed that inflation would decelerate from 1.9% to 1.6%/y, but food and fuel prices were firmer in the interim. The market median is far less aggressive at +0.3%/q, with just as many forecasts at +0.2%/q, hence there is a dovish tail. The RBNZ's February forecast was +0.2%/q.”

“We expect non-tradable/domestic inflation to lift by +0.9%/q or 2.7%/y, remaining in the top half of the RBNZ's 1-3% target range. We look for -0.2%/q for tradable inflation, with higher food prices offset by falling fuel prices (discounted fuel fell -4.2%/q).”

“A firmer inflation print than consensus/RBNZ supports our long-held view that economic activity does not need lower cash rates.”