New Zealand’s inflation expectations drop in Q3, shows RBNZ survey

The Reserve Bank of New Zealand’s near-term inflation expectations survey dropped in the third quarter. The survey questions respondents what they think inflation would be in two years’ time. The survey showed that the inflation expectations dropped to 2.09 percent from 2.1 percent.

According to the central bank’s survey, business managers forecast annual inflation to average 1.77 percent in the year ahead from May’s survey of 1.92 percent.

Inflation expectations had surged in June; however, it was dismissed as a product of a surprisingly high actual inflation figure that had printed shortly beforehand, noted Westpac in a research report.

The larger picture is that a range of New Zealand’s short-term inflation expectations surveys, including the RBNZ measure, have stepped up in the last nine months. In the meantime, long-term inflation expectations are sitting quite comfortable close to 2 percent. Overall, this would provide the RBNZ comfort that it is on the right path to returning inflation to 2 percent on a sustained basis, added Westpac.

The Reserve Bank of New Zealand is widely anticipated to keep its key interest rate unchanged when it meets next week in a bid to stimulate consumer price inflation that decelerated more than anticipated in the second quarter.

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