New Zealand: Inflation soars in Q4, enters New Zealand's Reserve Bank target range
January 26, 2017
In Q4, consumer prices in New Zealand inched up from the quarter-on-quarter seasonally-adjusted 0.3% increase observed in Q3 to 0.4%, matching market expectations. According to Statistics New Zealand, the increase reflected higher prices for transport and house-related items, offsetting lower prices for vegetables.
In Q4, inflation jumped from a revised 0.4% print (previously reported: +0.2% year-on-year) in Q3 to 1.3%. The fourth quarter reading marks the highest reading since Q2 2014 and a return to the Reserve Bank of New Zealand’s inflation target range of 1.0%-3.0% for the first time since Q3 2014.
Despite inflation crossing the Bank’s lower band threshold, analysts estimate that the Bank will leave the Official Cash Rate unchanged at their 9 February meeting. Inflation is set to stabilize above the lower target range in the foreseeable future as import inflation remains modest largely due to the strength of the local currency.