New Zealand's Q1 CPI slowed to 6.7% y/y vs. 6.9% consensus and 7.2% last. The RBNZ had forecast an acceleration to 7.3%, the only major central bank not seeing inflation having passed its peak. Thursday's data led to a selloff in NZD with rising expectation of a dovish outcome at the next RBNZ meeting. The OIS curve Is pricing 21bp of hikes in May, down from 23bp on Wednesday. While the RBNZ would welcome easing prices, the slowdown appears to be mostly from tradeable inflation, which is influenced by the exchange rate. Non-tradeable inflation, an indicator of domestic price pressures, rose to 1.7% q/q from 1.5% last. This likely reflects the impact of cyclone Gabrielle on food prices, the main driver of inflation. UBS New Zealand Economics does not see this peaking until mid-2023.
- UBS Strategy
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