Economists are confident that annual inflation will be shown to have peaked when Stats NZ releases new numbers on Tuesday.
The inflation update comes amid growing debate over whether the economy could stay “stronger for longer” than expected, or be dragged down further and faster than expected by fears increased from a global recession.
The Reserve Bank forecast in August that annual inflation in the three months to the end of September would fall to 6.4%, while the BNZ and ASB forecast a rate of 6.5% and ANZ will pick it for reach 6.6%.
Infometrics and Kiwibank say 6.8% and Westpac is beating forecasts with a 6.9% prediction.
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BNZ head of research Stephen Toplis said there would be a big market reaction if inflation did not come down from the 7.3% annual rate reported by Stats NZ in the June quarter.
But no forecaster seems to expect a fall big enough to dissuade the Reserve Bank from raising interest rates further.
Toplis said it was not worth speculating how much a fall could challenge the BNZ’s current expectation of a more than 50 basis point rise in the official cash rate next month, as a fall in inflation of this size was too improbable.
Laurent Delhourme/Things
Economists say the inflation rate for the September quarter will be six points.
Polls suggest that people’s worries about inflation are only gradually being replaced by fears about the impact of higher mortgage rates.
In a reader survey conducted between April and July, 52 percent named inflation as their top economic concern, and 13 percent said it was high housing prices.
This has dropped to 49% and 12%, respectively, since after July when readers were asked the same questions.
Meanwhile, the proportion of respondents identifying rising mortgage rates as people’s top concern has increased by five percentage points, from 28% to 33%.
The proportion of responses from people who identify unemployment as their main concern has changed little, at 6%. More than 50,000 responses have been received so far, split equally between the two voting periods.
Toplis said a fall in inflation in the September quarter was inevitable given that the big 2.2% quarterly rise in prices recorded in the September quarter last year will be out of the annual index this time around.
This previous rise had been the biggest quarterly rise in the consumer price index since 1987, excluding the impact of the VAT rise in 2011, and has not been surpassed since then .
Infometrics’ head of forecasting, Gareth Kiernan, said that, in line with his forecast, inflation would not have fallen at all in the three months to September this year if the fall in fuel prices had removed from the equation.
“There is still a breadth of inflationary pressures across the economy,” he said.
The Reserve Bank pays more attention to “underlying” inflation in “non-tradable” goods and services whose prices are determined locally, when setting interest rates.
ANZ and the Reserve Bank forecast non-negotiable inflation to remain unchanged from the June quarter at 6.3%.
Kiernan believed that it would probably take a fall in inflation below 6% for the Reserve Bank to step up.
But with a 5% increase already locked in from previously reported increases in the previous three quarters, that would require quarterly inflation to unexpectedly plummet to less than 1% in the September quarter.