The Reserve Bank of New Zealand (RBNZ) conducts a Survey of Expectations quarterly, gathering insights from forecasters, economists, and industry leaders on various economic indicators, including inflation.
The upcoming release is scheduled for today, Thursday 13 February 2025 at
- 0200 GMT, 2100 US Eastern time
In the previous survey, from November 2024, participants anticipated a decline in inflation rates:
- One-year-ahead inflation expectations: Decreased from 3.60% to 3.22%.
- Two-year-ahead expectations: Fell from 2.76% to 2.50%.
These downward trends suggest that those surveyed expected inflation to move closer to the RBNZ’s target range of 1 to 3 percent. The forthcoming February 2025 survey will provide updated insights into these expectations, reflecting recent economic developments and policy changes.
The survey can have an impact on New Zealand’s financial markets. The New Zealand dollar (NZD) often reacts if inflation expectations significantly shift.
- Higher-than-expected inflation expectations → May strengthen NZD as it lessens the likelihood/magnitude of interest rate cuts. Currently the RBNZ is expected to cut by 50bp at its meeting next week.
- Lower-than-expected inflation expectations → Can weaken NZD as it suggests a more dovish RBNZ and potential for/magnitude of future rate cuts.
The survey isn’t as high-impact as CPI data or an RBNZ rate decision, but larger-than-expected shifts in inflation expectations can still move markets, especially if they contradict RBNZ’s own projections.
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Current Market Context:
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Inflation Trends: As of the fourth quarter of 2024, annual consumer price inflation has declined to 2.2%, aligning with the RBNZ’s target range of 1% to 3%.
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Monetary Policy: In response to moderated inflation and economic contraction, the RBNZ has reduced the Official Cash Rate (OCR) by 125 basis points since August 2024, bringing it to 4.25%. Further cuts are anticipated, with markets pricing in a 70% probability of a 50-basis-point reduction on 19 February 2025.
