New Zealand Q4 CPI inflation data shows high domestic inflation, RBNZ likely look through

The data from New Zealand is here, domestic inflation is high and sticky:

• New Zealand Q4 CPI 0.5% q/q (expected 0.5%) and 4.7% y/y (expected 4.7%)

Which gave NZD/USD a boost:

• NZD/USD is jumping after a huge 5.9% non tradable inflation number in the Q4 data

ANZ analysis of the data, in brief:

• Annual CPI inflation decelerated from 5.6% to 4.7% y/y in Q4, in line with our forecast, and below the RBNZ’s November MPS forecast of 5.0%.
• While we were on the money with the headline, the details showed a downside surprise on the tradables side offset by a small upward surprise in non-tradable inflation. The RBNZ would have preferred the opposite.
• Non-tradables inflation came in at 5.9% y/y, above our and the RBNZ’s forecast of 5.7% y/y. The surprise relative to our forecast looks to have been driven by the volatile household energy component, which the RBNZ is likely to look through.
• The suite of core measures took a step down, boding well for the inflation outlook for the rest of the year.

ANZ expect an RBNZ rate cut in August this year:

• The details of today’s data support our view that domestic-driven inflation pressures are easing, albeit a little more slowly than the RBNZ anticipated in November. The RBNZ has signalled intolerance for upside surprises, but we think there’s enough progress evident to satisfy the Committee that things remain on track. We continue to expect that core domestic disinflation will continue over 2024, allowing cuts from August