{"id":634629,"date":"2026-10-18T20:54:10","date_gmt":"2026-10-18T20:54:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/634629\/"},"modified":"2026-10-18T20:54:10","modified_gmt":"2026-10-18T20:54:10","slug":"inflation-expected-to-ease-to-3-7-in-september-year-but-cash-rate-still-forecast-to-rise","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/634629\/","title":{"rendered":"Inflation expected to ease to 3.7% in September year but cash rate still forecast to rise"},"content":{"rendered":"The financial markets are pricing in a 70% chance that the Official Cash Rate (OCR), currently at 2.75% after a quarter-point rise in September, will be hiked on October 28 and a 100% chance by December.<\/p>\n
ANZ bank economists said the Reserve Bank\u2019s Monetary Policy Committee\u2019s focus would be on whether higher fuel prices are generating a broader inflationary impulse.<\/p>\n
\u201cBut even if those measures remain contained and the Q3 CPI prints close to our 3.7% [annual] forecast, the lower NZ dollar and higher oil prices since September have materially changed the outlook.<\/p>\n
\u201cIn our view, that keeps an October OCR hike firmly on the table,\u201d ANZ said.<\/p>\n
ANZ expects tradeable inflation, which measures price changes for goods and services that are imported, exported, or exposed to foreign competition in domestic and international markets, to come in at 4.2%.<\/p>\n
The bank expects annual non-tradeable inflation, the rate of price change for goods and services that do not face direct foreign or international competition, such as council rates, to be 3.5%.<\/p>\n
ANZ said the lower New Zealand dollar would add to near-term tradeable inflation pressure.<\/p>\n
\u201cIn a nutshell, if the Q3 CPI prints in line with our expectation, we do not think that will take an October hike off the table, given how much the inflation outlook has changed,\u201d ANZ said.<\/p>\n
Westpac senior economist Darren Gibbs said the Reserve Bank would be looking past the slight decline in headline inflation because of the ongoing complications posed by volatile oil prices and a weak currency.<\/p>\n
\u201cThey would not take a lot of comfort simply because it\u2019s a reflection of the fact that fuel prices on average were low in the September quarter, but we know that as the quarter wore on fuel prices came roaring back up.<\/p>\n
\u201cInflation for the December quarter, which we will see in January, is going to be even higher than it was in the June quarter [4.1%].<\/p>\n
\u201cIf you get the numbers that we expect, I don\u2019t think that would be material to the Reserve Bank\u2019s medium-term plan.<\/p>\n
\u201cWhat they do in October is an open question, and that will depend on what they think about the recent weakness of New Zealand dollar,\u201d he told the Herald.<\/p>\n
\u201cWith the rebound in oil prices and the prospect that inflation is going to be higher beyond this quarter, does that add to the inflation risk next year?<\/p>\n
\u201cThose are the sorts of questions that they will be asking themselves.\u201d<\/p>\n
Gibbs said October 28 would be an interim meeting and the bank would issue a full set of forecasts in its December 9 monetary policy statement.<\/p>\n
BNZ economists said the concern was with fuel prices and the weak New Zealand dollar.<\/p>\n
The bank said its third-quarter forecasts suggest some core measures are likely to push higher from already elevated levels.<\/p>\n
\u201cThat all feels a bit too hot for the central bank to sit idly by.<\/p>\n
\u201cWe remain of the view that the bank will continue lifting its cash rate including at its upcoming October meeting.\u201d<\/p>\n
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