New Zealand’s CPI slightly above forecasts, RBNZ likely to lower OCR

New Zealand’s Q1 headline consumer prices rose 0.2%, slightly above consensus projection of a rise of 0.1%; however, it was on par with the central bank’s expectations. The country’s annual CPI inflation accelerated to 0.4%. However, it was below 1% for the sixth straight time. Non-tradable and tradable price movements were majorly countering. Tradable prices fell 0.9% q/q and 1.2% y/y.

Within tradable prices, petrol prices dropped 7.7%, whereas international airfares declined 12%. Meanwhile, household contents and services rose 1.7%, while motor vehicle prices were up 1.6%. Non-tradable prices were up 1% q/q, with annual inflation decelerating to a 17-year low of 1.6%. In spite of this, the data on quarterly basis was stronger than the central bank’s expectations of a rise of 0.8% q/q. Core CPI, stripping energy, fuel and food prices, rose 0.6% q/q and 0.8% y/y.

Annual inflation from the central bank’s Sectoral Factor Model is expected to have continued to be around 1.5% in the first quarter of this year, according to ANZ’s components based model.

“While the data certainly doesn’t rule out the RBNZ cutting the OCR again next week, we don’t see it as the smoking gun that the market was hoping it would be. We continue to see the OCR going lower, but we are wary of the trade-offs this will bring”, noted ANZ.