The New Zealand Consumer Price Index (CPI) report for the fourth quarter (Q4) will be released on Tuesday 23 January at 21:45 GMT and as we get closer to release time, here are the forecasts from economists and researchers at four major banks regarding upcoming NZ inflation data.
The headline CPI is expected to increase 0.5% quarter-on-quarter compared to 1.8% in the third quarter, while the year-on-year rate would stand at 4.7% compared to the previous publication of 5.6%. If so, it would be the lowest since the second quarter of 2021. The RBNZ CPI projection for the fourth quarter is higher, at 0.8% quarter-on-quarter and 5.0% year-on-year.
ANZ
We expect annual CPI inflation to slow sharply to 4.7% year-on-year in the fourth quarter, below the RBNZ's November MPS forecast of 5.0% year-on-year. However, the expected downside surprise to the RBNZ's November forecast is entirely due to the tradable goods component, which we expect to fall from 4.7% to 3.4% year-on-year. We expect non-tradable goods inflation of 5.7% year-on-year, in line with the RBNZ's November forecast. With the RBNZ focusing on this component, surprises in this area will be important to the OCR's outlook, especially in the context of the RBNZ's impatience expressed in the November Monetary Policy Statement. We see the risks balanced at around 5.7%. We expect the core inflation mix to move materially lower. This is absolutely what the RBNZ needs to see, but we are aware that these measures are also influenced by weaker trade inflation, while the RBNZ's primary focus is on domestic inflation risks.
Westpac
Inflation will fall below RBNZ forecasts again. We expect consumer prices to have risen 0.5% in the December quarter, rising 4.7% over the past 12 months. In contrast, the latest forecasts published by the RBNZ assumed a rise of 0.8% in the quarter (+5.0% in the year to December). Our lower inflation forecast reflects softer prices for volatile items such as international airfares and food in the latest quarter, as highlighted by Stats NZ's expanded set of monthly price indicators. The most important question is what is happening to the underlying price trend. We expect most measures of core inflation – including measures of domestic price pressure – to moderate but remain at levels well above the RBNZ's target range.
TDS
We expect fourth quarter CPI inflation to be consensus at 0.5% quarter-on-quarter (RBNZ: 0.8%), which is a sharp slowdown from the 1.8% quarter-on-quarter in the third quarter. This brings the overall annual rate to 4.7% year-on-year, also well below the 5.6% year-on-year rate of the last quarter. Food prices are likely to be a big drag this quarter, down 1.1% quarter-on-quarter, while gasoline prices continue to decline. However, rental prices look more sticky and could be a cause for concern for the RBNZ, especially after it noted that strong population growth poses upside risks to inflation. If CPI inflation comes in below the RBNZ forecast, the RBNZ could scale back its hawkish rhetoric at its February meeting, given disappointing economic data (e.g. GDP, labor market) for the fourth quarter.
ING
We have recently updated our estimates for Q4 CPI in New Zealand, and we expect 0.4% q-o-q, which translates to 4.6% y-o-y. The consensus centers on 4.7%, a sign that expectations are much lower than the RBNZ's latest projections for the CPI for the fourth quarter, which stand at 5.0%.
Source: Fx Street

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