Have inflation expectations in New Zealand shifted recently? In a notable shift, New Zealand’s inflation expectations for the coming year hit a 28-month low in January, reflecting a decrease to 3.22% from the previous quarter’s 3.6%.
In a revealing glimpse into economic sentiment, New Zealand’s inflation expectations have diminished, touching the lowest point since September 2021. Survey results released Tuesday placed one-year inflation forecasts at 3.22%, a marked decline from 3.6% the previous quarter. This downturn in expectations arrives amidst broader economic recalibrations influencing financial forecasts and policy decisions.
Longer-term perspectives also revealed tempered inflation outlooks, with five-year expectations sliding to 2.25% and ten-year projections to 2.16%. These figures emerge from a survey commissioned by the Reserve Bank of New Zealand, capturing the anticipations and uncertainties prevalent among business leaders.
Additionally, projections for the official cash rate suggest it will peak at 5.46% by the end of the March quarter before receding to 4.74% by the year’s close. New Zealand’s central bank, which last raised interest rates on May 24, 2023, to a standing rate of 5.5%, is slated to release its next monetary policy statement by February 28, an announcement eagerly awaited by markets and analysts alike.
The nation’s job market is also expected to feel the pinch, with unemployment forecasts edging upwards to 4.64% in the next 12 months from 4.51% in the preceding quarter. This slight but steady rise suggests a cooling job market, with two-year unemployment predictions also inching higher.
In terms of economic growth, respondents tempered their optimism, predicting GDP expansion of 1.26% after a year and 1.88% after two, trailing behind previous estimates of 2.15%. These subdued forecasts speak to a cautious stance on economic momentum in the mid-term.
The housing market, a significant component of New Zealand’s economy, is not immune to these adjusted expectations. Anticipated house price growth over a one-year period was pegged at 4.82%, slightly below the earlier estimate of 4.84%. Two-year expectations also saw a downward revision.
This comprehensive survey, conducted by Research New Zealand between January 25 and 31, following the December 2023 quarter consumer price index release, encapsulates the evolving economic outlook of New Zealand’s business community. As the country navigates through these changing financial landscapes, the Reserve Bank of New Zealand’s upcoming policy statement becomes an even more crucial indicator of the economic path ahead. With insight from the gathered data, the nation prepares to adeptly manage its economic course in a global environment punctuated by flux and unpredictability.
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