11 Dec 2014
NZ might see inflation at 1% or below for straight five quarters – BNZ
FXStreet (Barcelona) - Stephen Toplis, Head of Research at Bank of New Zealand, reckons that New Zealand could see five consecutive quarters with inflation at 1.0% or below, with any resurgence depending upon NZD price, global deflation, and domestic demand.
Key Quotes
“By our reckoning, by September 2015 we will have witnessed five consecutive quarters of annual inflation at 1.0% or below. This must have an impact on inflation expectations and, in turn, future inflation.”
“Our expectation that there is finally a resurgence in inflationary pressure rests on three key assumptions: global deflation diminishes; the NZD falls; and excess demand in the domestic economy finally creates inflation.”
“In large part, the RBNZ has the same view. The risks are clear, particularly the upside risk to the currency and the ongoing downside risk to global commodity prices. With regard to commodity prices, there is also the NZ specific risk associated with dairy. The RBNZ has assumed dairy export prices rise by around 40% from current levels in USD terms. The assumption is not substantially different to either our own or Fonterra’s views. The direction of the risk is clear.”
Key Quotes
“By our reckoning, by September 2015 we will have witnessed five consecutive quarters of annual inflation at 1.0% or below. This must have an impact on inflation expectations and, in turn, future inflation.”
“Our expectation that there is finally a resurgence in inflationary pressure rests on three key assumptions: global deflation diminishes; the NZD falls; and excess demand in the domestic economy finally creates inflation.”
“In large part, the RBNZ has the same view. The risks are clear, particularly the upside risk to the currency and the ongoing downside risk to global commodity prices. With regard to commodity prices, there is also the NZ specific risk associated with dairy. The RBNZ has assumed dairy export prices rise by around 40% from current levels in USD terms. The assumption is not substantially different to either our own or Fonterra’s views. The direction of the risk is clear.”