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Analysts at ANZ explained that the Reserve Bank of New Zealand should be “feeling pretty comfortable” following CPI lifting 0.5% QoQ in Q4 – in line with ANZ forecasts, but stronger than the market (0.4%) and RBNZ’s November MPS forecast (0.2%).

Key quotes

At 1.9%, annual inflation is running just 0.1%pts shy of the 2% target midpoint, but with non-tradeable inflation expected to remain close to 3% y/y and a lift in tradeable inflation in the pipeline, 2020 should bring a 2-handle.

The RBNZ should be feeling pretty comfortable with the current state of play. Annual non-tradable inflation is (and should broadly remain) where it needs to be, core measures of inflation are at or close to 2%, and the economic data pulse has recently improved. We expect the OCR will be on hold at 1% for the foreseeable future, barring global shocks.