NZ Q2 CPI Preview

Stars aligning for an imminent OCR cut

New Zealand’s Q2 CPI will be released on 17 July. It’s an important data release given the RBNZ MPC’s dovishness this week and the fact that markets quickly shifted to price in an OCR cut as soon as August.

We weren’t completely surprised, flagging earlier this week that the RBNZ should be cutting very soon. But this is the RBNZ, you never quite know what you’re going to get!

For headline CPI inflation, the RBNZ’s May MPS forecasts had pencilled in +0.6% q/q and +3.6% y/y. Headline inflation is typically a little seasonally soft in Q2 - ~0.1ppts lower than in seasonally adjusted terms - but not hugely so.

Quarterly non-tradables inflation was forecast to be +0.8% q/q, which would be quite a slowing from recent outcomes, even allowing for the fact that June quarters are typically seasonally soft.

Offsetting this to a degree was the expectation that tradables prices would rise +0.3% q/q in Q2 after falling in each of the prior two quarters.

What’s our view?