Steady NZ CPI suggests RBNZ could surprise
Earlier in the day New Zealand CPI came in steady at 7.2% YoY for Q4, the same as previously, but above the 7.1% consensus estimate. The quarter-on-quarter read was 1.4% rather than the 1.3% forecast but a deceleration from the prior print of 2.2%. The YoY read was still below the central bank’s forecast of 7.5%, but still remaining close to the 30-year peak of 7.3% YoY printed in June 2022 This suggests that inflation isn’t cooling yet despite rapid rate increases. Price pressures were underpinned by higher house-building costs and higher wages, along with higher demand for holiday travel just like for Australia.
Non-tradable inflation, or domestic price rise rises, were up 6.6% YoY, same as last quarter. Meanwhile, tradable inflation was 8.2% YoY, higher than 8.1% YoY on Q3. While the downside surprise in non-tradable inflation may prompt some calls for the RBNZ to slow down its rapid rate increases, there is also reason to believe that the central bank could continue to deliver hawkish as inflation remains hot. This brings the February RBNZ meeting (decision due 22 Feb) in focus, with market pricing also split between a 50 or a 75bps rate hike.
Also worth noting that the new NZ Prime Minister Chris Hipkins is bringing the focus back on economic growth amid forecasts of a recession in 2023, and the administration is highlighting the fall in quarterly CPI from 2.2% in Q3 to 1.4% this quarter as a peak in inflation.