Analyst warns that the New Zealand CPI reading is 'no trigger for May cut'

The RBNZ next meet on May 8. With an OCR announcement, a Monetary Policy Statement and media conference.

Expectations of a rate cut from the Bank heightened after yesterday's soft CPI reading

• New Zealand Q1 CPI : 0.1% q/q (expected 0.3% and 1.5% y/y (expected 1.7%)

Later during the day we got the RBNZ 'core' measure:

• RBNZ inflation data +1.7% y/y (prior +1.7%)

But, warn TD … these inflation readings in NZ do not provide a trigger for easing as soon as next month
TD comments:

• The market reaction to the CPI miss was predictable when there is an easing bias on the table
• However, the miss was only by one decimal point for the RBNZ, domestic inflation surged to a five-year high of 2.8%/y, and tradable inflation is highly volatile
• Today's report(s) do not provide a trigger for easing as soon as next month. In a recent Reuters interview, the Governor hinted that a downside surprise was already baked into its March easing bias, where "... what you're looking at is a long period of being surprised to the downside of CPI inflation so we've ... re-centered and thought about that". The RBNZ (and the new external MPC committee members) also need to see a more recent labour market update, released 1 May