NZD: inflated expectations? (Strategy Views from Credit Agricol)

NZ inflation expectations data is usually the last piece of major data to come out
before the RBNZ’s rate decision and MPS. It often helps set the final tone for the
coming meeting. The RBNZ’s steep rate hikes and falls in headline and core
inflation have led to lower inflation expectations with 2Y ahead corporate
expectations, a key metric for the RBNZ, declining to 2.76% in Q4 and the lowest
level in a just over two years. Inflation expectations peaked in late 2022 at 3.6%,
well above the RBNZ’s 1-3% target band.While inflation expectations are currently
within the RBNZ’s target band, the central bank would want to see them closer to
2% and the centre of its target band before considering cutting rates.