9 Jun 2015
RBNZ meeting preview: OCR should be lower – ANZ
FXStreet (Barcelona) - Cameron Bagrie, Chief Economist at ANZ, uses their proprietary inflation gauge to give the outlook for inflation, and further comments that the absence in inflationary pressures suggests the RBNZ should move the OCR lower.
Key Quotes
“Prices in our Gauge fell 0.1% in May, following a 0.2% fall in April. This is the first time we’ve seen consecutive monthly falls. Prices fell in four groups, rose in one, and were unchanged in the remaining three.”
“Prices in the Underlying Ex-housing Gauge also fell 0.1%.”
“Prices in the headline Gauge rose 0.6% in the three months to May but price rises outside of government charges and housing remain virtually non-existent, with just a 0.1% increase over this period.”
“The trajectory of price rises is also slowing. Plugging in a 0.2% monthly rise for June (the average June outturn for the past two years) would deliver just a 0.1% Q2 rise in the Gauge and a flat quarterly outturn for the Ex-housing Underlying Gauge, both well below the RBNZ’s March MPS pick of a 0.5% increase in Q2 non-tradable prices. Despite the economy entering its fifth year of expansion, signs of generalised inflationary pressure have remained absent.”
“The OCR should be lower. The RBNZ has an inflation target, not a growth or a housing one. Of course the three are interconnected and asset prices are now a consideration in setting the OCR, but one dominates; one policy instrument (OCR) equals one target (inflation).”
Key Quotes
“Prices in our Gauge fell 0.1% in May, following a 0.2% fall in April. This is the first time we’ve seen consecutive monthly falls. Prices fell in four groups, rose in one, and were unchanged in the remaining three.”
“Prices in the Underlying Ex-housing Gauge also fell 0.1%.”
“Prices in the headline Gauge rose 0.6% in the three months to May but price rises outside of government charges and housing remain virtually non-existent, with just a 0.1% increase over this period.”
“The trajectory of price rises is also slowing. Plugging in a 0.2% monthly rise for June (the average June outturn for the past two years) would deliver just a 0.1% Q2 rise in the Gauge and a flat quarterly outturn for the Ex-housing Underlying Gauge, both well below the RBNZ’s March MPS pick of a 0.5% increase in Q2 non-tradable prices. Despite the economy entering its fifth year of expansion, signs of generalised inflationary pressure have remained absent.”
“The OCR should be lower. The RBNZ has an inflation target, not a growth or a housing one. Of course the three are interconnected and asset prices are now a consideration in setting the OCR, but one dominates; one policy instrument (OCR) equals one target (inflation).”