RBNZ Review: Inflation Forecast Revised Higher
RBNZ keeps rate unchanged 2.25%
Inflation Forecast Revised Higher but no hawkish tilt
The RBNZ kept rates unchanged at 2.25% in the April meeting and has revised their inflation forecast. They see crude oil price below 100 USD/b by the end of June, which led to their inflation forecast for March to be just 3% y/y and 4.2% y/y in June. It is interesting we are not seeing a hawkish tilt from the RBNZ with 4.2% y/y CPI expected. They are downplaying such with weak demand and spare productive capacity.
Some key takeaways:
Geopolitical Driven Energy Spike: They see the current supply disruption different from COVID or Russian invasion. While short term inflation spike is inevitable, they see medium term inflationary pressure fluid on geopolitical development, local demand and subsequent wage setting behavior. Such factors are currently expected to be neutralizing each other.
No Hawkish Tilt: The RBNZ has revised their inflation forecast in response to the energy spike. The already overshooting inflation does not seem to be tilting the RBNZ towards a strong tightening commitment. Despite the board has spilt opinion towards interest rate development, the language used in the statement is not strong. It is very likely the RBNZ will prefer not to tighten as their central forecast but largely depending on geopolitical development.