NZ inflation jumps to 4.1% in Q2, beating forecasts and RBNZ’s own estimate, with more to come!
A hotter than expected print raises the odds the RBNZ needs to extend its recently restarted tightening cycle beyond what markets currently price. With the cash rate only just lifted to 2.50% after three years on hold, today's data strengthens the case for follow through hikes and is likely to support the New Zealand dollar and push short end rates higher. Attention will now turn quickly to the RBNZ's sectoral factor model due later today, given headline CPI was so heavily skewed by fuel. A hot core reading would reinforce the hawkish case; a soft one could temper it.
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New Zealand inflation ran hotter than both economists and the Reserve Bank expected in the second quarter, driven overwhelmingly by fuel costs, and the RBNZ's preferred core inflation gauge is due later today to show how much of that pressure runs deeper than petrol prices.
Summary:
- New Zealand's CPI rose 4.1% y/y and 1.5% q/q in Q2, above forecasts of 4.0% and 1.4%
- Petrol prices rose 27.5% and diesel prices rose 71.1% over the year, the largest contributors to inflation
- Excluding petrol and diesel, CPI would have risen 2.9% over the 12 months to June 30
- Non-tradeables inflation was 3.4% y/y and 0.6% q/q, while tradeables rose 2.7% q/q
- The RBNZ had forecast 3.9% y/y for Q2, expecting inflation to ease to 3.3% in Q3 as oil related base effects fade
- The RBNZ raised its cash rate to 2.50% earlier this month, its first hike in three years, and signalled further tightening ahead
- The RBNZ's sectoral factor model, its preferred underlying inflation measure, is due at 3pm New Zealand time today, which is 3am GMT and 11pm US Eastern time on Monday
New Zealand's annual inflation accelerated to 4.1% in the second quarter, above analysts' forecasts and well over the top of the central bank's target range, according to Reuters, as fuel costs drove the bulk of the increase. The consumer price index rose 1.5% from the previous quarter, Statistics New Zealand said, with both figures beating the 4.0% and 1.4% economists had expected.
Petrol prices rose 27.5% over the year and diesel prices jumped 71.1%, Statistics New Zealand said, making fuel by far the largest single contributor to the headline number. Stripping out petrol and diesel, the agency said annual CPI would have risen just 2.9%, underlining how much of the upside surprise was concentrated in energy rather than broader price pressure.
The result sits well above the RBNZ's own forecast of 3.9% for the quarter, issued earlier this month, when the Bank also projected inflation would ease to 3.3% in the third quarter as the boost from Middle East linked oil price rises drops out of the annual comparison. The RBNZ targets inflation between 1% and 3% over the medium term and raised its cash rate to 2.50% earlier this month, its first hike in three years, while signalling further tightening would likely be needed to bring inflation back within range.
Markets will get a further read on the extent of underlying price pressure later today, when the RBNZ releases its sectoral factor model, due at 3pm New Zealand time, or 3am GMT and 11pm US Eastern time on Monday. The model is the RBNZ's own preferred measure of core inflation, built by extracting a common inflation signal from a large number of individual CPI components rather than relying on the headline rate or simple exclusion measures such as CPI ex food and energy. By filtering out price moves specific to individual goods or services, such as the fuel swings that dominated today's headline figure, the model is designed to give policymakers a cleaner read on the persistent, economy wide inflation trend that matters most for setting interest rates. Given how heavily today's CPI was skewed by petrol and diesel, the sectoral factor model reading will be closely watched for signs of how much inflation pressure is building beneath the surface.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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