INDEPENDENT NEWS

Inflation expectations ease in Reserve Bank survey

Published: Tue 12 Feb 2019 07:58 PM
Inflation expectations ease in Reserve Bank survey as chances of rate cut grow
By Paul McBeth
Feb. 12 (BusinessDesk) - Business managers and finance professionals trimmed their inflation expectations in the latest Reserve Bank survey, at a time when traders are pricing in a growing chance of lower interest rates.
Respondents to the central bank's quarterly survey predict consumer price inflation of 1.82 percent a year from now, down from the 2.09 percent rate expected in the December survey. Two-year expectations were for inflation of 2.02 percent, down 1 basis point (0.01 percent) from the previous survey.
A net 68.3 percent of firms believe current monetary conditions are easier than neutral, compared to a net 63.8 percent in December. "Easier than neutral" indicates rates which are low enough to stoke growth. Meanwhile, a net 75.6 percent of respondents predict easier conditions in a year's time, up from 52.2 percent three months ago.
The Reserve Bank will release its first monetary policy statement of the year tomorrow afternoon.
Governor Adrian Orr is expected to keep the official cash rate at a record low 1.75 percent, although traders will be closely watching his tone and language, given US and Australian central bankers have indicated policies of lower rates for longer. Traders are pricing in a 42 percent chance of a rate cut by June and a 100 percent chance over the next 12 months.
ASB Bank economist Mark Smith said the lower short-term interest rate track was in line with recent declines in fuel prices, and longer-term inflation expectations appear anchored around the central bank's 2 percent target.
"We expect the RBNZ to remain focused on medium- to long-term inflation expectations, of which the outlook for GDP growth is a key ingredient," he said in a note.
The survey's respondents trimmed their outlook for economic growth, predicting GDP to respectively rise at an annual rate of 2.38 percent and 2.36 percent one and two years ahead. They had previously expected annual GDP growth of 2.44 percent on both horizons.
The unemployment rate is seen at 4.17 percent in a year's time and 4.27 percent in two years. Statistics New Zealand figures last week showed the rate at 4.3 percent in December. It was released after the RBNZ survey was conducted Jan. 23-24.
Respondents expected wages to rise 2.9 percent over the coming year and 2.86 percent in two years, down from 2.92 percent and 3.04 percent respectively in the December survey.
Expectations of house price inflation also eased, with respondents predicting prices to rise 1.91 percent in the coming year, and 2.14 percent over the next two years. They'd previously predicted increases of 2.86 percent and 2.31 percent respectively.
(BusinessDesk)
BusinessDesk
Independent, Trustworthy New Zealand Business News
The Wellington-based BusinessDesk team provides a daily news feed for a serious business audience.
Contact BusinessDesk
Email:

Next in Business, Science, and Tech

ANZ boss departs under cloud
By: RNZ
Plan to expand protection for Maui and Hector’s dolphins
By: New Zealand Government
Fish & Game back call from Canterbury Officer of Health
By: Fish and Game New Zealand
Government invests in cancer research, vertical farm science
By: New Zealand Government
Net migration remains high
By: Statistics New Zealand
Hisco ANZ departure becomes permanent amid expense concerns
By: BusinessDesk
Dolphin protection plan – Expert Reaction
By: Science Media Centre
Statement on Hector and Maui Threat Management proposals
By: Seafood New Zealand
NZ demands change to save Maui dolphin
By: Forest And Bird
Māui and Hector’s dolphin proposals not fit for crisis
By: Greenpeace New Zealand
Growing risk of nitrate contamination private water supplies
By: Water New Zealand
Government to invest $75m into Gracefield Innovation Quarter
By: BusinessDesk
Defence to draw more on local suppliers, smarts
By: BusinessDesk
Investment in Gracefield Innovation Quarter
By: New Zealand Government
Government matches Malaghan Institute’s ambitions for cancer
By: Malaghan Institute
View as: DESKTOP | MOBILEWe're in BETA! Send Feedback © Scoop Media