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Christina Leung: NZIER Deputy Chief Executive talks inflation forecast ahead of Q4 release · Early Edition with Ryan Bridge

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  Speaker 1: Right, we're getting inflation figures today. Economists of forecasting it
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  Speaker 1: could fall between two point one to two point three percent,
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  Speaker 1: which is within the Reserve Banks target range. Nzed Ier.
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  Speaker 1: Deputy Chief Executive Christina Lung joins me. Now, good morning, Christina.
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  Speaker 2: Moderna, what's your pick. We forecast CPI to have increase
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  Speaker 2: point six percent over the final quarter of last year. Now,
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  Speaker 2: this will bring in your CPI inflation to two point
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  Speaker 2: two percent for the year, as you say, still within
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  Speaker 2: the Reserve Banks one to three percent inflation target fan.
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  Speaker 2: So for the quarter, we do expect that housing costs
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  Speaker 2: such as rents and construction costs to be a key
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  Speaker 2: driver behind the increasing prices over the quarter.
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  Speaker 1: Because I was going to say, this inflation data is
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  Speaker 1: for December, so what factors will be taken into account
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  Speaker 1: during that period aside from those two things.
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  Speaker 2: So besides the CPI result itself, we do see a
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  Speaker 2: suite of other inflation indicators. For example, we are seeing
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  Speaker 2: it continue easy in inflation pressures in the news and economy.
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  Speaker 2: Our latest NDIO less of our business opinion shows some
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  Speaker 2: easing and cost pressures reported by firms, while proportion of
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  Speaker 2: firms raising prices in the December quorder remain low. So
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  Speaker 2: although firms are feeling positive about a recovery and demand
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  Speaker 2: a head, at the moment demand conditions do remain weak
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  Speaker 2: and does it weighing on the price and power firms.
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  Speaker 1: So Christina, how is this going to set us up
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  Speaker 1: for this year? How are you expecting inflation to track?
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  Speaker 2: So we do see list in inflation over the coming year,
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  Speaker 2: but still comfortable and within the Reserve banks one to
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  Speaker 2: three percent inflation tiger band. The recent appreciation in the
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  Speaker 2: New Zone dollar does post some upside rest to inflation,
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  Speaker 2: given that raises the price of important goods. So already
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  Speaker 2: in our MZAAR quarterly Serve our business opinion, we had
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  Speaker 2: retailers reporting increased cost pressures and we expect that the
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  Speaker 2: low New Zealand dollar to have played a part in this.
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  Speaker 2: So the impact of the low New Zealand dollar on
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  Speaker 2: inflation is definitely an important development to keep an eye
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  Speaker 2: on for now, though the signs are that inflation is
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  Speaker 2: contained and within the Reserve banks target bands. The Reserve
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  Speaker 2: Bank has indicated that late last year it's intended to
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  Speaker 2: cut interest rates by another fifty basis point at the
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  Speaker 2: February meeting, and we don't see recent developments standing in
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  Speaker 2: the way of that.
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  Speaker 1: You mentioned the week New Zealand dollar there, what about
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  Speaker 1: higher oil prices? Could they impact inflation this year?
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  Speaker 2: Certainly? So you do tend to see the lower New
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  Speaker 2: Zealand dollar the impact, the more immediate impact of that
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  Speaker 2: comes through in petrol prices at the pump and also
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  Speaker 2: crude all price Global crude all prices play a part
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  Speaker 2: when it comes to what we pay for petrol here
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  Speaker 2: in New Zealand. Over the longer term, New Zealand dollar
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  Speaker 2: does have tend to have been more lagged impact on
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  Speaker 2: a range of other household imported household goods, So you
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  Speaker 2: do tend to see that comes through in the next
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  Speaker 2: few quarters when it comes to the impact of the
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  Speaker 2: lower New Zealand dollar on prices on the retail front.
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  Speaker 1: You mentioned half percentage point cut to the official cash rate.
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  Speaker 1: When do you sort of expect that When would you
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  Speaker 1: expect that to kick in?
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  Speaker 2: So back in late last year, the Reserve Bank had
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  Speaker 2: indicated that it would look to cut the oco bernard
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  Speaker 2: the fifty basis point in its February meeting and then
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  Speaker 2: and for the further easing to be more measured beyond that. Certainly,
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  Speaker 2: when we look at what the recent to continue easing
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  Speaker 2: and inflation pressures, it does suggest that recent deviropments are
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  Speaker 2: on track in line with the Reserve Banks forecasts. So
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  Speaker 2: we do expect that it will follow through with that
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  Speaker 2: fifty basis point cut in its February meeting.
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  Speaker 1: Okay, cool, what is the impact you think of Trump's
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  Speaker 1: tariffs and potential tariffs?
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  Speaker 2: So there has been concern about the inflationary the potential
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  Speaker 2: inflationary impact of fiscal policies are in the US, so
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  Speaker 2: that will be an influence in terms of the longer
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  Speaker 2: term path of interest rates. The fact that there's already
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  Speaker 2: a discussion about the potential with the inflation andy impactful
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  Speaker 2: interest rates to be high for longer in the US,
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  Speaker 2: So that does play a part in terms of a
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  Speaker 2: particularly with the impact on the New Zone dollar mis
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  Speaker 2: interst rate differentials. If interest rates were to stay higher
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  Speaker 2: for longer in the US, then that potentially continue to
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  Speaker 2: put down with pressure on the New Zone dollar, and
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  Speaker 2: that plays a part in terms of the price of
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  Speaker 2: important goods. Here. Certainly, it could play a part in
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  Speaker 2: terms of the other factors such as how those prices
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  Speaker 2: global prices feed into prices here in New Zealand as well.
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  Speaker 1: A lot to keep our eye on this year.
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  Speaker 2: Christina certainly never dull moment.
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  Speaker 1: Alwa's good to talk. Thank you so much. That was
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  Speaker 1: Christina Leung who is the Deputy Chief Executive at n
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  Speaker 1: Z I e R. And so of course those inflation
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  Speaker 1: figures will be out today.
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  Speaker 2: For more from Early Edition with Ryan Bridge.
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