RBNZ: firmly on hold despite higher oil – Westpac

With respect to the RBNZ and the OCR, analysts at Westpac acknowledged that rising oil prices, a lower NZD and higher fuel taxes have conspired to see petrol prices at the pump increase to as much as $2.50/litre in some locations.

Key Quotes:

“This will contribute to CPI inflation, which we expect will increase above the RBNZ’s 2% target midpoint early next year before moderating.”

“The inflationary impact of petrol price increases tends to be transitory, and the RBNZ will look through it.”

“However, growth impacts matter too.”

“Higher petrol prices will boost costs for already downbeat businesses, and it will also squeeze the discretionary purchasing power of households. Households lack savings buffers to absorb unexpected events – be that something as dramatic as job loss or as everyday as petrol price movements.”

“Given businesses are already downbeat, a spooked consumer to boot could make quite a dent in the economic outlook. Therefore higher petrol prices are unlikely to make the RBNZ any more eager to hike the OCR.”