Economist at UOB Group Lee Sue Ann assesses the latest inflation figures in New Zealand.

Key Takeaways

“CPI climbed 1.7% q/q in 1Q22, a tad lower from the 1.8% q/q in 1Q22, but above expectations for a gain of 1.5% q/q. Compared to the same period a year ago, CPI advanced 7.3% y/y, an acceleration from 6.9% y/y in 1Q22. The outcome was also above expectations for a reading of 7.1% y/y.”

“Overall, the inflationary backdrop is very uncertain, with global inflationary pressures remaining intense. Although today’s readings could represent a peak, we now expect inflation to reach 5.9% for this year (compared to 5.5% previously), before easing towards 2.4% in 2023.”

“There are three more monetary policy meetings for this year – 17 Aug, 5 Oct and 23 Nov. We now see the Reserve Bank of New Zealand (RBNZ) raising rates by 50bps in Aug and again in Oct and Nov, bringing the OCR to 4.00% by year-end (3.75% previously).”