QII CPI inflation was close to market and RBNZ expectations, lifting 0.2% over the quarter. The annual rate of inflation edged slightly lower to 0.7% from 0.9% and has remained below the RBNZ’s target band of 1-3% for a full year now. Behind the headline result was the continued theme of the elevated NZD and tradable goods price declines masking a lift in domestically-generated inflation pressures (non-tradable inflation). Indeed, the 0.6% increase in non-tradable inflation was slightly stronger than the RBNZ expected. In addition, signs that construction costs are now increasing outside of the Canterbury rebuild are also likely to be a source of concern for the central bank.
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Commonwealth Bank