New Zealand Inflation Expectations Plummet Amid Lingering Economic Woes. Amidst a protracted economic downturn in New Zealand, inflation expectations have taken a notable downturn, alleviating some of the pressure on the Reserve Bank of New Zealand (RBNZ) to implement further interest rate hikes.
According to data released by the RBNZ on Monday, expectations for inflation one year ahead plummeted to 2.73% in the first quarter from 3.22% in the prior survey. Similarly, the outlook for inflation two years ahead dropped to 2.33% from 2.50% in the previous quarter.
This significant decline in inflation expectations coincides with ongoing economic challenges in New Zealand, where the economy remains mired in recessionary conditions. Recent economic data released on Monday underscored the persisting economic weakness in the country.
In particular, New Zealand’s services sector, a key component of the economy, is experiencing its most subdued period since the beginning of 2022, indicating scant signs of a forthcoming recovery. The BNZ – BusinessNZ Performance of Services Index for April stood at 47.1, a marginal decrease of 0.1 points from March and marking the lowest level of activity for the sector since January 2022.
The waning inflation outlook coupled with ongoing economic fragility suggests a more subdued path for monetary policy adjustments by the RBNZ in the near term, as the central bank seeks to navigate the challenges of sustaining economic recovery while managing inflationary pressures. New Zealand Inflation Expectations Plummet Amid Lingering Economic Woes.
