Oil prices and the inflation outlook
In notes from a speech delivered in Dunedin, Reserve Bank of New Zealand governor Anna Breman said on Tuesday that if recent increases in global oil prices persist, near-term inflation would come in somewhat higher than the central bank assumed in its September statement. She described the recent rises in global oil prices and longer-term interest rates as a reflection of the challenging environment the country faces. The central bank had forecast that consumer price inflation would ease slightly to 3.9% in the September quarter, down from 4.1% in the previous quarter.[S1]
Recovery risks and the October decision
According to Breman, the recovery in the economy should gain strength and widen, helped along by exports and a steady rise in household spending, though she cautioned that substantial dangers to that recovery persist. At its September policy meeting, the central bank lifted the main cash rate by 25 basis points to 2.75%, while signalling a slower pace of further tightening than financial markets had largely expected. Breman noted the bank would weigh incoming data and global developments before its next decision in October, keeping its attention on the medium-term inflation outlook. The RBNZ convenes on Oct 28, and markets price a 75% probability of another hike to 3%.[S1]
