Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


RBNZ unlikely to hike next week after CPI surprise

RBNZ unlikely to jump the gun with January rate hike on accelerating inflation

By Paul McBeth

Jan. 21 (BusinessDesk) - Accelerating inflation isn’t expected to sway the Reserve Bank from a March rate hike, as rising consumer prices firm up the outlook of a strengthening economy.

Markets were surprised at the strength of today’s inflation data, with the New Zealand dollar climbing 0.8 percent after Statistics New Zealand said the consumers price index increased 0.1 percent in the three months ended Dec. 31, slowing from a quarterly increase of 0.9 percent, according to Statistics New Zealand.

That was against a forecast decline of 0.1 percent in a Reuters survey of economists and the Reserve Bank's expectation of a 0.2 percent fall. The annual pace of inflation was 1.6 percent, its fastest pace since March 2012 and slightly ahead of forecasts.

“This cements where we were heading – that the bank signalled its move to raise rates when needed,” said Robin Clements, economist at UBS New Zealand in Christchurch. “It makes it (the Reserve Bank) more comfortable in its approach to go through all the reasons of its outlook when it comes out in March, and next week sets the path towards that.”

Central bank governor Graeme Wheeler had previously indicated he will start hiking the 2.5 percent official cash rate this year to head off the threat of future inflation as the Auckland and Christchurch property markets continue to bubble and as the Canterbury rebuild gathers momentum.

Traders are pricing in a 26 percent chance of a rate hike, according to the Overnight Index Swap curve.

Chrstina Leung, an economist at ASB, said the 0.5 percent decline in tradable inflation, which includes goods and services facing international competition, was less than what the Reserve Bank was picking, while non-tradable inflation was in line with expectations with an increase of 0.5 percent.

“We continue to expect the RBNZ will wait until March to raise the OCR, although we now see the probability of a January OCR increase as slightly higher now (25 percent, up from our pre-CPI view of 20 percent probability),” Leung said in a note. “Although NZ inflation is contained for now, the OCR will need to be increased before long as demand improves and brings a lift in underlying inflation pressures over the coming year.”

The quarterly increase was driven by a 12 percent rise in the price of international airfares, the biggest quarterly gain in four years, and a 6.7 percent increase in domestic flights.

Prices for housing and household utilities rose 0.5 percent with a 1.1 percent rise in the cost of new housing and a 1.6 percent increase in property maintenance services. Prices for milk cheese and eggs advanced 4.2 percent in the quarter.

Those were offset by a 20 percent drop in the price of vegetables and a 3.5 percent decline in the price of petrol.

The annual pace of inflation, which stayed in the Reserve Bank's target band of between 1 percent and 3 percent, was driven by a 3.2 percent increase in housing and household utilities, with a 4.7 percent increase in new housing prices, a 2.1 percent rise in rental prices, 4.3 percent increase in property maintenance, and a 3 percent rise in electricity prices. Petrol prices for an annual 0.9 percent

Prices for clothing and footwear fell an annual 1.4 percent, led by cheaper women's clothing, clothing accessories and men's footwear, and 2.8 percent decline in the annual price of communications was led by a 21 percent slide in prices for telecommunication equipment.

The level of discounting in the quarter was unchanged at 15 percent of prices discounted from the September period.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Export Values Down: NZ Posts Biggest Annual Trade Deficit In 7 Years

New Zealand has recorded its biggest annual trade deficit since April 2009, reflecting weaker prices of agricultural commodities such as dairy products, beef and lamb, and increased imports of vehicles and machinery. More>>

ALSO:

Currency Events: NZ's New $5 Note Wins International Banknote Award

New Zealand’s new Brighter Money $5 note has been named Banknote of the Year in a prestigious international competition. The $5 note was awarded the IBNS Banknote of the Year title at the International Bank Note Society’s annual meeting. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news