NZ Q2 CPI: ‘fuel’ for Wheeler’s neutral stance – TDS

New Zealand’s June quarter CPI was flat, as expected by TD but below that expected by the market (+0.2%) and the RBNZ (+0.3%) which is likely to support the RBNZ’s Governor maintaining neutral stance at the 10 August MPS, according to analysts at TDS.

Key Quotes

“Annual inflation sank from 2.2% to 1.7%/yr, comfortably below the RBNZ’s 2% mid-point target.”

“The RBNZ has surprised the markets a few times by remaining neutral despite bouts of market bullishness. This soft CPI report supports the Governor maintaining this stance at the 10 August MPS.”

“The OIS strip is now well underpriced for our February 2018 hike to 2%, but now is not the time to position for the 2018 RBNZ tightening cycle. We look for AUDNZD to slide back towards parity by year end.”