Analysts at ANZ explained that Oil prices have had a decent rally since Q4 2017, underpinned by solid demand, geopolitical tensions and tight supply. It is leading to higher petrol prices in NZ.
Key Quotes:
“Based on current weights, a 1% rise in petrol prices is expected to make a 0.05%pt direct contribution to annual inflation. This excludes indirect impacts through the likes of higher transportation costs.”
“Combined with a weakening NZD and increase in petrol levies, higher fuel prices are set to make a decent contribution to the CPI in the next few quarters. The question is how much and for how long?”
“While we see upside risks to tradables inflation from higher fuel costs, we don’t expect this will warrant much response from the Reserve Bank, given the transitory nature of the impact of petrol price changes on the CPI.”
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