Reserve Bank<\/a> released two separate surveys looking at inflation expectations.<\/p>\nOne canvassed about 40 economists, business leaders and professional forecasters, while the other surveyed more than 1000 New Zealand households.<\/p>\n
The good news is that the experts are relatively relaxed.<\/p>\n
Unsurprisingly, this group has raised its collective view on short-term inflation on the back of higher fuel prices and supply chain disruption.<\/p>\n
More importantly, longer-term expectations remain remarkably well anchored.<\/p>\n
Five-year inflation expectations sit around 2.2%, while 10-year expectations are slightly lower, at just above 2%.<\/p>\n
The Reserve Bank will take comfort in that.<\/p>\n
It suggests people who spend their lives watching the economy believe the system is working, and that inflation will eventually settle back to something more normal.<\/p>\n
Then again, it\u2019s not the opinion of this group that matters most.<\/p>\n
Economists don\u2019t drive the economy, households do, and the household survey painted a slightly different picture.<\/p>\n
The typical New Zealand household expects inflation to still be around 5% a year from now, and 4% in two years\u2019 time.<\/p>\n
Even five years from now, households still expect inflation to be running hotter than the Reserve Bank would like.<\/p>\n
You can understand why.<\/p>\n
Most people don\u2019t experience inflation by looking at the official statistics or through their spreadsheet models.<\/p>\n
They see it when fuelling up the car, paying the rates or insurance bill, and checking the supermarket receipt.<\/p>\n
Until 2021, nobody under 50 had experienced genuinely high price pressures.<\/p>\n
New Zealand inflation was low in the 30 years leading up to that, averaging about 2% annually and only pushing much higher for brief periods.<\/p>\n
However, it\u2019s been close to 5% per annum these past five years and once people have lived through a cost-of-living shock, that experience lingers.<\/p>\n
Just as we thought things were coming under control, another shock has emerged and households are braced for that.<\/p>\n
They know what might come next, and those perceptions matter.<\/p>\n
This doesn\u2019t mean rampant inflation is a foregone conclusion, but it helps explain why the Reserve Bank is on high alert and watching expectations so closely.<\/p>\n
If it can convince us all that the fuel price spike will be temporary and isolated, all will be well.<\/p>\n
But if households lose faith in the bank\u2019s ability or resolve to keep broader price pressures in check, that\u2019ll make its job much harder.<\/p>\n
Mark Lister<\/a> is Investment Director at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision Craigs Investment Partners recommends you contact an investment adviser. <\/p>\n","protected":false},"excerpt":{"rendered":"If enough people expect prices to rise, there\u2019s a risk they\u2019ll start behaving in ways that will ensure…\n","protected":false},"author":2,"featured_media":454519,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[1643,138,23852,11129,38691,3105,10668,219,28161,1958,3339,8454,13986,1943,185,81692,3935,32573,225,111,139,69,1523,4517,3333,699,10665,644,667,7812,13109,4518,23331,4276],"class_list":["post-454518","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-bank","tag-business","tag-consumers","tag-cpi","tag-crucial","tag-data","tag-economic","tag-economy","tag-expectations","tag-focus","tag-housing","tag-including","tag-index","tag-inflation","tag-is","tag-lister","tag-managing","tag-mark","tag-market","tag-new-zealand","tag-newzealand","tag-nz","tag-over","tag-past","tag-price","tag-releases","tag-reserve","tag-retail","tag-sales","tag-seen","tag-several","tag-weeks","tag-weve","tag-why"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/454518","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=454518"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/454518\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/454519"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=454518"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=454518"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=454518"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}