New Zealand April Inflation Expectations Climb Higher, ANZ Says

(Bloomberg) -- New Zealand inflation expectations continue to climb as price pressures in the economy persist, a survey of business sentiment showed, validating the central bank’s jumbo interest-rate hike two weeks ago.

Inflation expectations advanced to 5.92% in April from 5.51% a month earlier, ANZ Bank New Zealand said Thursday after publishing its monthly Business Outlook.  While firms’ pricing intentions eased slightly, they remain “sky high,” with 77% expecting to lift prices in coming months, the bank said.

Inflation accelerated to the fastest pace in in 32 years last quarter, with the annual consumer price index surging 6.9%. Yet several economists, including at ANZ, suggest that result may have represented a top. The Reserve Bank hiked its official cash rate by half a percentage point on April 13 to rein in inflation.

Pricing intentions “continue to suggest upside risk to our tentative forecast that CPI inflation may have peaked,” ANZ said. It continues to expect another half-point rate increase in May, which would take the OCR to 2%.

Still, across the survey there was “mildly encouraging news” for the central bank, ANZ said.

“While inflation pressures remain extreme, and inflation expectations jumped further, there were some tentative signs of the acceleration in costs easing,” it said. “But with plenty of wage and other cost inflation in the pipeline, it will be some time before the RBNZ can conclude that they’re getting ahead of the inflation game.”

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