RBNZ expected to remain sidelined until H2 2018 – UOB

Researchers at UOB Group see the RBNZ on hold in the next months following recent publication of inflation figures.

Key Quotes

“In a sign that falling oil prices were hampering cost pressures throughout the economy, New Zealand’s inflation unexpectedly stalled in the second quarter. CPI was zero, following a 1% increase in the March quarter. Food prices rose 0.7% during the quarter, whilst household utilities costs climbed 0.8%. Transport prices were down 1.3%. Annual inflation rose 1.7%, following a 2.2% increase the previous quarter”.

“Whilst easing inflation is a concern for policymakers, at the same time, tame inflationary pressures are a welcome sign for homeowners in New Zealand worried about mortgage rates and a broad cool down in economic growth. The New Zealand economy gained 0.5% in the first quarter, which was below expectations for a 0.7% increase”.

“The softer-than-expected inflation outcome also lends support to the view of the RBNZ that a spike up in inflation earlier in the year was fanned by temporary factors. The print should also dampen market speculation for an earlier-than-expected rate hike (akin to the Bank of Canada’s move) and remains consistent with our view that the next move but not be until at least the middle of 2018”.