New Zealand headline CPI inflation fell to a 15-year low of 0.1% in Q1 from 0.8% in Q4, largely due to a plunge in petrol prices. (Data released on Monday.) Looking ahead, with petrol prices now rising, headline inflation should rebound in the second quarter. But a softening in GDP growth this year will prevent underlying inflation from rising as far as the RBNZ expects. It should instead stay close to the lower bound of the Bank’s 1-3% target range. “We believe that the RBNZ key policy rate will fall from 3.5% now to 3.0% by the end of the year.” – said Capital Economics
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