New Zealand inflation probably slowed markedly in the second quarter as the central bank’s aggressive interest-rate increases began to take their toll.
(Bloomberg) — New Zealand inflation probably slowed markedly in the second quarter as the central bank’s aggressive interest-rate increases began to take their toll.
Consumer prices rose 5.9% from a year earlier, according to the median estimate in a Bloomberg News survey of 14 economists. That would be a big drop from 6.7% in the first quarter and the weakest reading since 2021. It would also undershoot the Reserve Bank’s forecast of 6.1%. Statistics New Zealand will publish the data Wednesday in Wellington.
Inflation has been drifting lower after reaching a three-decade high of 7.3% in mid-2022. Economists now expect a sharper decline as petrol prices fall and soaring mortgage rates curb household spending.
“Wednesday’s CPI print should confirm that inflation is past the peak,” said Kiwibank Chief Economist Jarrod Kerr. “There’s a growing reluctance among households to splurge on non-essential goods, and with another 40% of mortgages due for re-pricing over the coming year, we’d expect a further slowing in consumer spending.”
The RBNZ last week held the Official Cash Rate at 5.5% — the first pause after 12 consecutive hikes — but said policy will need to remain tight for the foreseeable future to ensure inflation returns to its 1-3% target range.
The bank’s 525 basis points of tightening since October 2021, the most aggressive since the OCR was introduced in 1999, has stalled the economy.
Gross domestic product contracted in the final months of 2022 and the first quarter of this year, and while growth may have returned in the second quarter, three of the nation’s biggest banks predict another recession will start later this year.
The RBNZ in May projected it wouldn’t need to raise rates again. Most economists concur, although a couple still forecast one further hike to 5.75% later in 2023.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.