RBNZ Survey Shows Mixed Inflation Expectations

Highlights:

• Two-Year Inflation Expectations Increase: Two-year-ahead inflation expectations rose from 2.03% to 2.12%, signaling a slight uptick in the medium-term inflation outlook.
• One-Year Inflation Expectations Decline: One-year-ahead inflation expectations dropped by 35 basis points, from 2.4% to 2.05%, reflecting a more optimistic short-term inflation outlook.
• Annual Inflation Falls: Annual inflation decreased to 2.2% in the September quarter, down from 3.3% in June, suggesting easing price pressures.

The Reserve Bank of New Zealand’s (RBNZ) latest survey reveals shifting inflation expectations for the year ahead, reflecting mixed economic signals. At the time of writing, two-year-ahead inflation expectations have slightly increased, while one-year expectations continue to decrease.

Two-Year Inflation Expectations Rise

According to the RBNZ’s most recent survey, two-year-ahead inflation expectations rose from 2.03% to 2.12%. This increase, though modest, suggests a slightly higher outlook for inflation in the medium term. The uptick follows recent concerns over ongoing price pressures in various sectors.

One-Year Inflation Expectations Slide

In contrast, one-year-ahead inflation expectations have fallen significantly. The expectation dropped by 35 basis points, from 2.4% to 2.05%, signaling a more optimistic short-term outlook for price stability. This decrease comes amid the easing of inflationary pressures seen in recent months.

Annual Inflation Declines

Annual inflation for the September quarter stood at 2.2%, down from 3.3% in the June quarter. This decline reflects efforts by the Reserve Bank to keep inflation within its target range, providing some relief for consumers and businesses.

Five-Year Inflation Outlook Increases

Longer-term expectations also showed slight upward movement. The mean five-year-ahead annual inflation expectation rose by 17 basis points, reflecting concerns about potential future price pressures despite current efforts to curb inflation.

These mixed inflation expectations highlight the uncertainty in New Zealand's economic outlook, as the country navigates global and domestic challenges. The Reserve Bank will continue monitoring these expectations closely as it shapes future monetary policy.

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