CPI Review: Inflation surges through the inflation target mid-point
The Q1 CPI increased more than expected with annual inflation now at 2.2%, stronger than ourselves, the market and the RBNZ expected. Core measures of inflation (including the trimmed mean and weighted median) also reported annual rates of 2.2%, highlighting that the overall lift in inflation is relatively broad-based. The recent sharp recovery in inflation will come as a significant relief to the RBNZ. The lift has taken inflation expectations back to the middle of the target band with it, removing one of the RBNZ’s key concerns of recent years.
We expect the current lift in headline inflation will be temporary, as does the RBNZ, given there were several ‘one-offs’ in Q1. Nonetheless, we expect annual inflation to hover around 1.5% and 2% over the next few years. As such, downside risks to inflation, especially those stemming from weaker inflation expectations, have significantly reduced over the past six months. We continue to expect the RBNZ will lift the OCR in late 2018, around a year earlier than the RBNZ’s February view.
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Nick Tuffley
ASB Chief Economist
Since starting out in 1997 as an economist, it's fair to say Nick has seen a few hair-raising moments over the years, including the Asian Financial Crisis and the Global Financial Crisis.
One of Nick's strengths is his ability to communicate complex ideas in a readily understandable and entertaining way. He thrives on helping people understand the economic environment to help enrich the quality of their business or personal life. He’s proud to lead a team that has won two Forecast Accuracy Awards from Consensus Economics, and has a strong track record with their Official Cash Rate and dairy price forecasts.
Nick grew up in Christchurch and graduated with a Master of Commerce degree from the University of Canterbury. He learned his economic ropes at the Reserve Bank of New Zealand before a long stint as a Senior Economist at Westpac, and joined ASB as Chief Economist in 2007.
- Email: Nick
Jane Turner
Senior Economist
Originally hailing from sunny Nelson, Jane moved to Auckland to join the ASB team in 2008. As Senior Economist, Jane's main focus is co-ordinating the team’s macro-economic forecasts. In this key role, Jane was thrilled by the team’s twice consecutive win of the Consensus Economics Forecast Accuracy award.
During her decade-long career in economic forecasting, Jane has gained a thorough knowledge of the New Zealand economy. Her current focus is on New Zealand GDP growth, including both manufacturing and the construction sectors. She has spent time forecasting most sectors of the economy, including inflation, trade, housing, labour and financial markets.
Prior to joining ASB, Jane honed her macro-economic forecasting skills at the Reserve Bank of New Zealand. Jane is a qualified scarfie, attending Otago University and graduating with a Bachelor of Commerce in Economics with 1st class honours. In 2014, she took a career break from ASB to travel the world and learn to snowboard.
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Daniel Snowden
Economist
Daniel has the knack of turning what may appear as a block of random numbers into a story, be it trends in migration and tourism, to consumer spending patterns. In addition to telling the story behind the numbers, Daniel has an ability to estimate what the next economic chapter may be and who stands to gain and lose from it.
He joined ASB after moving to New Zealand from London, where he spent five years analysing Latin American economies for Informa Global Markets. Although New Zealand and South America may appear as quite different economies, there are a surprising number of similarities. Countries such as Chile, Peru and Colombia are small, open economies with free-floating exchange rates, a strong commodity export focus and inflation-targeting central banks, while also dealing with the impact of much larger regional neighbours.
Daniel has also worked in foreign exchange markets for a number of years, including time spent with ABN AMRO and Lloyds Bank. He is the author of a number of ASB reports, including the NZD Barometer and Markets Monthly. When he’s not working, Daniel can often be found running, cycling or swimming along the seafront, a novelty after living in London.
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