NZ CPI undershot expectations in Q2, watching for a dovish RBNZ - ANZ

Analysts at ANZ explained that headline inflation undershot expectations in Q2, and non-tradable inflation was also on the softer side of expectations.

Key Quotes:

"However, the latter appears to have been influenced by sharp falls in a small number of components (domestic airfares, rental cars). Where there is evidence of capacity strain (construction sector), price tension is clear and intensifying. Underlying measures also continue to lift off lows (albeit very gradually), making for a convoluted picture.

Nevertheless, today’s data will increase the odds of an August OCR cut. We still believe that in a backdrop of a strong domestic economy, growing capacity pressures and broadening housing and credit largesse, cutting the OCR again is not without risks. However, given low headline inflation, already soft inflation expectations and the strong NZD, it does look like the RBNZ will be dragged back to the easing table once again."