21 Jan 2014
Flash: NZ CPI strengthens case RBNZ to embark on substantial hiking cycle - Westpac
FXstreet.com (Bali) - NZ CPI rose 0.1% in Q4, stronger than Westpac, RBNZ or market forecasts, notes Sean Callow, FX Strategist at Westpac.
Key Quotes
"Quarterly inflation was held to a low level by a normal seasonal decline in food prices, and a drop in petrol prices. Most of the surprise relative to our forecast was in tradeables inflation, particularly airfares, household items and recreational goods. This points to muted pass through from the strong exchange rate."
"Of more concern to the Reserve Bank will be the housing-related categories. "Purchase of new housing," which basically covers construction costs, rose 1.1% in the quarter and is now up 4.7% over the past year."
"Moreover, rising construction costs are now starting to affect the whole of New Zealand, rather than being confined to Canterbury. This is something we have been warning of ever since the Canterbury earthquakes struck."
"Our core view has been that the Canterbury rebuild would strain the economy's resources and generate inflationary pressures, forcing the Reserve Bank into a substantial OCR hiking cycle. That view now looks to be coming to fruition."
Key Quotes
"Quarterly inflation was held to a low level by a normal seasonal decline in food prices, and a drop in petrol prices. Most of the surprise relative to our forecast was in tradeables inflation, particularly airfares, household items and recreational goods. This points to muted pass through from the strong exchange rate."
"Of more concern to the Reserve Bank will be the housing-related categories. "Purchase of new housing," which basically covers construction costs, rose 1.1% in the quarter and is now up 4.7% over the past year."
"Moreover, rising construction costs are now starting to affect the whole of New Zealand, rather than being confined to Canterbury. This is something we have been warning of ever since the Canterbury earthquakes struck."
"Our core view has been that the Canterbury rebuild would strain the economy's resources and generate inflationary pressures, forcing the Reserve Bank into a substantial OCR hiking cycle. That view now looks to be coming to fruition."