29th Jan 2019 – Mark Brown
This week saw the release of NZ CPI inflation for Q4 2018. While headline annual inflation measure remained below 2%, the details showed core underlying pressures a little stronger than expected and continuing to lift to target. Rather than sparking any immediate change in policy direction, in our view, the CPI release will see the RBNZ continuing to “watch, worry, and wait”.
Leading into the CPI release, the market had been entertaining the idea of a 50% chance of a 25 basis point cut in the Official Cash Rate (OCR) by March 2020. That had been driven by the balance of news since the November Monetary Policy Statement (MPS), including falling oil prices, stronger NZ dollar, softer Q3 GDP, the prospect of higher capital requirements and wobbles in global markets …