New Zealand Inflation Q4 2016

New Zealand

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.

According to its August Monetary Policy Statement, the Bank expects inflation to remain subdued and to average 1.6% in the fiscal year 2017, which ends in March 2018. For FY 2018, the Bank expects inflation to average 2.1%. FocusEconomics Consensus Forecast panelists expect inflation to average 1.5% in 2017, which is unchanged from last month’s forecast. For 2018, the panel foresees inflation rising to 1.9%.


Author: Jean-Philippe Pourcelot, Economist

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New Zealand Inflation Chart


New Zealand Inflation Q4 2016

Note: Quarter-on-quarter and annual variation of consumer price index in %.
Source: Statistics New Zealand and FocusEconomics calculations.


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