Annual Inflation likely to fall in the near term - NZ Treasury's monthly report

New Zealand Treasury's monthly report on economic indicators says the annual inflation will likely fall to  around 1% in the March year 2018, as the impact of earlier petrol price increases drop out of the annual calculation, and some policy changes (including to tertiary education) are expected to result in low inflation in the quarter.

Key points

Most analysts have pushed out their forecasts of any OCR increase until 2019 with market expectations now showing a 25 basis point increase not priced in until the first quarter of 2019.

Global inflationary pressures remain subdued

With respect to GDP in 2018, we are likely to see the boost to meat exports reverse, while the weakness in dairy is likely to persist. This suggests some weakness in the coming quarters

The rise in global bond yields reflects increased confidence for continued growth in demand, as the global economy recovers and US fiscal stimulus boosts investment