RBNZ Survey – Inflation is expected to rise & to be around 3%

Aggressive polls at the Reserve Bank showed a very sharp rise in expectations for future inflation.  The results of the RBNZ’s latest quarterly forecast survey could fuel speculation that the RBNZ could raise its official cash rate by up to 50 basis points in a November 24 interest rate review. Click here for details of the survey results. The RBNZ has been tracking this survey very closely and in some cases was very strongly influenced by the results of interest rate decisions. At least for the latest results, next week’s OCR should increase by 25 basis points to 0.75%. Satish Ranchhod, a senior economist at Westpac, said the latest poll, along with other recent data, “shows increased inflationary pressures in the medium term.” Most notable in the survey is two-year inflation expectations.

In general, these numbers do not fluctuate much between surveys. However, in the latest survey, inflation expectations rose from 2.27% three months ago to 2.96% in two years. This is a huge step according to the criteria of this study.

The 2.96% value is the highest since the 3.00% value in the same survey in June 2011. Prior to June 2011, the same survey had to go back to the early 1990s to find higher numbers.  Short-term inflation expectations for one year have risen from 3.02% three months ago to 3.7% in the latest survey.

The latest number is definitely to worry about the RBNZ. Perhaps he is most plagued by inflation expectations five years from now. This particular survey had only expectations for the five years from 2017 and this time, in about five years, that number has reached a record high, rising from 2.03% three months ago to 2.17%. That’s a big step. And, as I said, it may be the most worrisome statistic of the whole survey. The RBNZ wants long-term inflation expectations to be “fixed” at around 2%, which may indicate that companies will budget higher prices in the future, so this rise we concerned. The poll results are the last important part of the economic puzzle ahead of the RBNZ’s next interest rate decision on Wednesday, November 24th.

And poll results follow other economic data that continue to faint positively. As RBNZ raised the OCR from 0.25% to 0.5% on October 6, the annual inflation rate at the end of September was 4.9%, much higher than expected, and the unemployment rate was much lower than expected. .. The

RBNZ has two goals: keep inflation within 1% and 3% and support maximum sustainable employment. Now, while current inflation is clearly out of range, economists believe that they have already reached the maximum level of sustainable employment; a labor shortage is clear and can put upward pressure on wages.