New Zealand inflation expectations inch up, stay near 2% target

NEW Zealand two-year ahead inflation expectations crept higher, but remained near the midpoint of the central bank’s target band.

The measure rose to 2.12 per cent in the fourth quarter from 2.03 per cent in the third, the Reserve Bank of New Zealand (RBNZ) said on Monday (Nov 11) in Wellington, citing its quarterly survey. One-year ahead expectations eased to 2.05 per cent while the five-year view climbed to 2.24 per cent.

The RBNZ began easing monetary policy in August saying weak domestic demand gave it confidence that inflation was returning towards the middle of its 1 to 3 per cent target. It stepped up the pace of cuts last month, when it lowered the Official Cash Rate (OCR) by 50 basis points to 4.75 per cent, and most economists expect another 50-point reduction at the final rate decision of the year on Nov 27.

Annual inflation slowed to 2.2 per cent in the third quarter, returning to the target band for the first time in more than three years.

The RBNZ survey of business leaders and professional forecasters was sent out the day after the inflation data was published. It also asks questions about the OCR, economic growth and unemployment.

Respondents expect the OCR to fall to 3.33 per cent by the end of the third quarter next year, the report showed. They expect the economy will grow 1.6 per cent in the year to September 2025. BLOOMBERG