New Zealand inflation expectations ease: RBNZ survey
By Rebecca Howard
Aug. 7 (BusinessDesk) - New Zealand firms dialled back their inflation expectations for the next two years, which will
likely add to the view the central bank will delay any forecast rate hikes even further at its Thursday review.
The Reserve Bank's survey of expectations showed respondents see annual inflation at 1.77 percent in one year, down from
1.92 percent rate in the prior survey three months ago. In two years it is seen at 2.09 percent, down from 2.17 percent.
The Reserve Bank is mandated with keeping annual inflation between 1 percent and 3 percent, with a focus on the mid
point. Annual inflation was running at 1.7 percent in the second quarter as weaker fuel prices offset rises in household
basics like rent, food and electricity.
The survey comes just days before the Reserve Bank is scheduled to release its latest cash rate decision and monetary
policy statement. All 11 economists polled by Bloomberg expect the central bank to keep rates at a record low 1.75
percent and say it may now signal rates will be on hold until 2020. In its May monetary policy statement, the central
bank's forecasts indicated that rates would remain on hold until September 2019. Since then inflation and growth have
been lower than the RBNZ expected.
Firms trimmed their expectations for economic growth on an annual real gross domestic product basis to 2.75 percent for
the year ahead from 2.81 percent but the expectations increased to 2.64 percent in two years time from 2.58 percent in
the prior survey.
The jobless rate is seen at 4.8 percent in one year - the level it is currently at - and it is tipped to remain steady
in two years. Wage growth is also expected to remain tepid. Annual wage growth for one year ahead is seen at 2.26
percent versus 2.41 percent in the prior survey and to 2.49 percent in two years from 2.71 percent.
The New Zealand dollar is expected to be at 71 US cents by the end of December, increasing from 69 US cents in the
previous survey. It is expected to be at 70 US cents by the end of June. It was trading at 74 US cents when the survey
was conducted on July 19 and 20 and is currently trading at 74.03 US cents.
(BusinessDesk)