Survey signals a more ‘dovish’ RBNZ monetary policy statement

The Stats NZ quarterly Household Expectations Survey showing predicted CPI inflation of 6% in 12 months down to 3.3% in two years is expected to be highlighted in today’s Monetary Policy Statement.

Westpac chief economist Satish Ranchhod says the expectations are an encouraging sign for the RBNZ which is battling high inflation of 6% in the year to June.

One year inflation expectations were at 7.4% and two year expectations at 4.5% in the previous survey.

“With expectations dropping back, the RBNZ can feel more comfortable about the outlook for domestic inflation. The results will help to counter concerns about the persistence strength in domestic inflation,” Ranchhod says.

Results from the survey also show expectations for inflation five years ahead remain steady at 2% – the mid-point of the RBNZ’s target band.

Details from the online survey of about 1,000 Kiwi householders were pulled forward by one day. This means the data is now in the public arena ahead of today’s RBNZ policy statement, Ranchhod says. “The RBNZ had a detailed discussion of inflation expectations in the previous May policy statement. This is the first MPS since then.”

The central bank has been using the survey more in its deliberations after the bank’s analysis two years ago found it was significantly better than similar forecasts.

In the same survey, householders reckon house prices will rise 1.6% over the next year, compared to 0.6% in the previous survey and over the next five years prices will increase significantly  8.1%, a 1.9% rise from the previous survey of 6.2%.

For those owning a house, 13.4% say there could be a chance of missing a mortgage payment in the next three months, but the good news is that is down by 2.4% from 15.8% in the last survey.

The average reported chance of missing a rent payment in the next three months is 16.3%, an increase from last quarter’s 15.5%.

To help with mortgage payments and the cost of living , households are expecting a 6.4% increase in their wages over the next year, up from a 6% increase in the previous survey. This is assuming they stay in the same job with the same number of hours.

Ranchhod says the survey results are a tick in favour of a more ‘dovish’ RBNZ policy statement.

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