NZ: After CPI miss, focus shifts on RBNZ - TDS

Research Team at TDS, notes that the New Zealand’s Jun qtr CPI rose +0.4%, less than TD, markets and the RBNZ expected. 

Key Quotes 

“However, fuel accounted for half of the increase, which was widely expected, and the biggest downside miss was a slump in domestic airfares.  The annual rate remained at +0.4%/yr, below the Bank’s June +0.6%/yr forecast.

Nevertheless, this week is all about Thursday’s unexpected inter-meeting “brief economic assessment”.  The policy dilemma for the Bank is via competing priorities of an unsustainably high exchange rate, and unsustainably rampant house price inflation.  We are of the view that the RBNZ can do a lot more about dampening house price inflation, and very little about ‘controlling’ the exchange rate.  Hence we do not see Thursday’s EA as preparing for an August cut and see a floor under the NZD at $US0.705 for now.”