Earlier today we had the official CPI data from NZ:
From the Reserve Bank of New Zealand now, its model falling below Q4 and under the top of its 3% band:
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Reserve Bank of New Zealand’s sectoral factor model of inflation, its preferred measure.
- The model is based on the idea that inflation in each sector of the economy is influenced by a common set of underlying factors or “factors” such as changes in interest rates, exchange rates, and commodity prices.
- The model describes how inflation in each sector of the economy is affected by the underlying factors. Estimates are derived from data on past inflation rates and other relevant indicators and are used to generate forecasts for future inflation in each sector.
- The RBNZ sectoral factor model of inflation is particularly useful because it allows the central bank to identify the sources of inflationary pressures in different parts of the economy. For example, if inflation is rising rapidly in the housing sector, the RBNZ can use the model to determine whether this is due to changes in interest rates or other factors specific to the housing market. By understanding the sources of inflationary pressures, the RBNZ can adjust its monetary policy to target inflation effectively and achieve its inflation targets.
This article was written by Eamonn Sheridan at www.forexlive.com.
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