Prices rose at a 5.9% annual pace, economist predicts
The latest inflation data for the June quarter, set for release Wednesday, will likely show prices rose at a 5.9% annual pace – the lowest level since December 2021, ASB economists have predicted.
That figure was down from the 6.7% CPI YoY in the previous quarter and lower than the Reserve Bank’s 6.1% forecast in its May monetary policy statement.
In ASB’s latest economic note, Kim Mundy (pictured above), senior economist, said despite the anticipated further moderation in the pace of inflation in Q2 2023, “inflation remains high and well above the RBNZ’s 1-3% inflation target.”
“Food and housing and utilities are likely to have continued to drive price increases, as has been the case in recent quarters,” Mundy said. “But there is a risk we see less widespread price rises than in recent prints as demand slows.”
ASB said the deceleration in inflation will likely “remain modest at best,” especially core inflation rates.
“Non-tradable inflation is proving sticky and, although we are seeing tentative signs that the labour market is cooling, we expect it will take some time for that to translate into a meaningful slowdown in wage inflation,” Mundy said.
“As a result, we expect core measures (Q1 30% trimmed mean 6.1% yoy, 50% weighted median 5.6% yoy, CPI ex food, energy, and fuels +6.5% yoy) will continue to hover around recent highs.”
The bank also noted, however, that there was slightly less evidence of widespread price gains relative to recent CPI prints, which suggested that high stock levels, combined with cooling demand, could have encouraged some businesses to move stock via sales.
Mundy said ASB the Q2 CPI is expected to reinforce that RBNZ is “on track” to bring inflation down to target. And although the bank believes the current 5.5% OCR is the peak, it also expects RBNZ to not cut the OCR until May 2024.
“Inflation is likely to continue its gradual descent, but the pace of the slowdown will keep the RBNZ wary, and of the view that restrictive settings will need to remain in place for some time,” she said. “We don’t expect the RBNZ to contemplate cutting the OCR until May 2024.”
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