NZ inflation expectations slow in RBNZ survey, unemployment seen as staying high
By Paul McBeth
Feb. 26 (BusinessDesk) - New Zealand's expected pace of inflation over the coming two years has slowed down from the
start of the year, though unemployment is still picked as staying relatively high, according to the latest central bank
survey.
Respondents to the Reserve Bank's March survey of expectations don't seen any sign of rising interest rates, with
consumer price inflation seen at 1.67 percent for the year ahead and 2.17 percent in two years' time. That's down from
1.77 percent and 2.27 percent respectively from the January survey.
"Monetary conditions are currently perceived as being easy, and are expected to remain easy over the forecast horizon,"
the Reserve Bank said in its commentary.
Governor Graeme Wheeler has found himself stuck between a booming property market in Auckland and $30 billion rebuild in
Christchurch gathering momentum, and a tepid economic recovery and subdued inflation with the strong kiwi dollar taking
the sting out of imports.
ASB economist Jane Turner said the decline in medium-term inflation expectations is in line with the moderation in
various measures and underpin the downbeat environment.
"Due to the subdued near-term inflation outlook, we expect the RBNZ will leave the OCR on hold at 2.5 percent until
March 2014," she said.
The 74 respondents were still pessimistic about the labour market, with one-year ahead expectations for the unemployment
rate down 0.1 of a percentage point to 6.7 percent, while two-year ahead picks were unchanged at 6.3 percent.
Earnings growth expectations fell, with year-ahead wage increases expected to be 2.3 percent, form 2.5 percent in the
January survey, and the two-year ahead outlook falling 0.2 of a percentage point to 2.7 percent.
Still, they're slightly more upbeat about the economy, with real gross domestic product growth of 2.3 percent expected
for the one-year horizon, and 2.6 percent for the two-year. That's up from 2.1 percent and 2.3 percent, respectively in
the previous survey.
Respondents see the kiwi dollar trading at 84 US cents at the end of June, falling to 83 cents by the end of the year.
They predict it will trade at 82 Australian cents by the end of December.
(BusinessDesk)