NZ Q3 CPI: housing-led pressures don’t justify RBNZ neutral stance – TDS

Analysts at TDS note that New Zealand’s Sep qtr CPI rose by +0.5%/qtr, mid-way between TD at +0.6% and mkt at +0.4%, and above that expected by the RBNZ (+0.2%).

Key Quotes

“Annual inflation rose from 1.7% to 1.9%/yr, closer to the RBNZ’s 2% mid-point target.”

“The RBNZ under Wheeler shocked the markets a few times this year by remaining neutral despite bouts of data-led market bullishness. We don’t expect Spencer to maintain this artificial neutrality for much longer.”

“A flat 1.75% OIS does not reflect our view, and so any hawkish tones from Spencer will be a surprise for rates, and the NZD.”

“In the meantime, we are still waiting for the NZ First Board to announce which major party they will support in the wake of the inconclusive 23 September election. This uncertainty is capping NZD gains for now.”