RBNZ cautious amid mixed inflation signals

2025 eyed for rate cuts

RBNZ cautious amid mixed inflation signals

The Q2 2024 RBNZ Survey of Expectations continued the trend of decreasing short-term inflation expectations, aligning more closely with the RBNZ’s target range of 1-3%.

“RBNZ will be pleased to see inflation expectations broadly drifting lower to levels that are more consistent with the RBNZ’s 1-3% inflation target,” ASB senior economist Kim Mundy (pictured above) said.

Despite positive trends, the latest selected price indices revealed that inflation pressures still persist in certain areas, warranting a cautious approach from RBNZ.

“The implication is that we simply have not accrued enough evidence to convince the RBNZ it has done enough to combat inflation,” Mundy said. “We still expect a period of prolonged monetary policy tightness, with OCR cuts not pencilled in until early 2025.”

Economic and labour market outlook

The survey also highlighted expectations for a cooler labour market and subdued wage inflation.

“Greater slack is expected in the labour market, with the unemployment rate still expected to increase,” Mundy said, reflecting ongoing economic adjustments.

Growth expectations remain low, influenced by tight monetary settings aimed at controlling inflation.

Housing and consumer expectations

Amid cooling house price expectations, RBNZ continues to assess broader economic indicators.

“House price expectations have also continued to cool,” Mundy said, signaling a potential easing in one area of inflationary pressure.

The upcoming Tara-ā-Whare Household Expectations Survey will provide further insights into household inflation perceptions, crucial for shaping future RBNZ policies.

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