US Federal Reserve chairman Jerome Powell has confirmed fears that interest rate cuts in the US would be later rather than sooner as inflation remains stubbornly high. If that price pressure persists, the Fed can keep rates steady for “as long as needed,” Powell said. This came after US retail sales figures for March came in much stronger than expected, stoking speculation rates would stay higher for longer.
This is a theme reinforced by the IMF, who published a report, while data form the UK and New Zealand also reconfirmed the stickier story.
The risks to markets and households are rising.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
The latest decision from the New Zealand Monetary Policy Committee was released on Wednesday, which was to leave the cash rate at 5.5%. Their key messages were little changed since the February MPS, showing little hurry to change current restrictive settings despite overall CPI inflation expected to fall below 3% this calendar year.
Upside short-term risks to the inflation outlook were largely downplayed, with the RBNZ expecting sub 3% inflation later this year. Despite the economic outlook evolving broadly as expected and inflation on a cooling trend, the RBNZ chose to defer any decisions on when to pivot to an easing bias until more clarity emerges.
Higher for longer…. again!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
Kiwis Faced With Higher For Longer Rates Stuck At 5.5%!
The latest decision from the New Zealand Monetary Policy Committee was released on Wednesday, which was to leave the cash rate at 5.5%. Their key messages were little changed since the February MPS, showing little hurry to change current restrictive settings despite overall CPI inflation expected to fall below 3% this calendar year.
Upside short-term risks to the inflation outlook were largely downplayed, with the RBNZ expecting sub 3% inflation later this year. Despite the economic outlook evolving broadly as expected and inflation on a cooling trend, the RBNZ chose to defer any decisions on when to pivot to an easing bias until more clarity emerges.
Higher for longer…. again!
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
On Wednesday Statistics New Zealand released consumer price index (CPI) data for the December quarter. The data showed that New Zealand inflation slowed in the final three months of 2023, despite indicators of domestic price pressures remained stubbornly strong, which came in below the Reserve Bank’s expectations. As a result, it appears that policymakers are likely to hold until there’s a clearer picture of the economy.
“While this is the smallest annual rise in the CPI in over two years, it remains above the Reserve Bank of New Zealand’s target range of 1 to 3 percent,” consumers prices senior manager Nicola Growden said.
The OCR currently stands at 5.5%. While Investors are betting the RBNZ will start cutting the Official Cash Rate in the second quarter and will lower the benchmark to 4.75% by year’s end. But as I discussed recently, policymakers remained concerned about sticky core prices and most economists expect the RBNZ will delay a rate cut until the second half of 2024. In November, the central bank projected that inflation would drop below 3% in the third quarter of this year.
“Inflation continues to move in the right direction,” said Jarrod Kerr, chief economist at Kiwibank in Auckland. “The current state of play and the outlook should be sufficient to see the RBNZ pivot away from rate hikes. Rate cuts are not too far away.”
However, others remain more sanguine. “The divergence between the domestic and imported components of inflation helps to illustrate the big concerns that the RBNZ is trying to balance,”said Satish Ranchhod, senior economist at Westpac Banking Corp.
“Inflation is coming down. That will be important for stabilizing inflation expectations and means that the RBNZ will feel more comfortable keeping the OCR on hold for now.”
Westpac believes the CPI print will keep the Reserve Bank of New Zealand on hold through 2024 because inflation is “still uncomfortably high”.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
Kiwi Inflation Eases, But Slowly, So Rates Will Remain Higher For Longer!
On Wednesday Statistics New Zealand released consumer price index (CPI) data for the December quarter. The data showed that New Zealand inflation slowed in the final three months of 2023, despite indicators of domestic price pressures remained stubbornly strong, which came in below the Reserve Bank’s expectations. As a result, it appears that policymakers are likely to hold until there’s a clearer picture of the economy.
“While this is the smallest annual rise in the CPI in over two years, it remains above the Reserve Bank of New Zealand’s target range of 1 to 3 percent,” consumers prices senior manager Nicola Growden said.
The OCR currently stands at 5.5%. While Investors are betting the RBNZ will start cutting the Official Cash Rate in the second quarter and will lower the benchmark to 4.75% by year’s end. But as I discussed recently, policymakers remained concerned about sticky core prices and most economists expect the RBNZ will delay a rate cut until the second half of 2024. In November, the central bank projected that inflation would drop below 3% in the third quarter of this year.
“Inflation continues to move in the right direction,” said Jarrod Kerr, chief economist at Kiwibank in Auckland. “The current state of play and the outlook should be sufficient to see the RBNZ pivot away from rate hikes. Rate cuts are not too far away.”
However, others remain more sanguine. “The divergence between the domestic and imported components of inflation helps to illustrate the big concerns that the RBNZ is trying to balance,”said Satish Ranchhod, senior economist at Westpac Banking Corp.
“Inflation is coming down. That will be important for stabilizing inflation expectations and means that the RBNZ will feel more comfortable keeping the OCR on hold for now.”
Westpac believes the CPI print will keep the Reserve Bank of New Zealand on hold through 2024 because inflation is “still uncomfortably high”.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
We got the latest on New Zealand Property for December 2023 from the Real Estate Institute of New Zealand.
I love how they spin the release, saying that the December 2023 figures show a notable increase in sales activity, median prices lifting, lower days to sell, and a clear sense of more confidence overall (year-on-year).
This is despite the fact that actually New Zealand house prices edged lower in December, down around 0.3% mom on a seasonally adjusted basis, though trends diverged across the country, ranging from a 1.9% mom fall in Northland to a 4.2% lift in Tasman.
The national average was weighed down by a 0.9% mom price fall in Auckland. Among other big regions, Wellington prices lifted 0.6%, while prices in Canterbury eased 0.1%.
ASB’s commentary on the REINZ figures are helpful here. They say the NZ housing market has struggled to establish a clear direction since the last housing market correction came to an end in around March/April last year. Monthly price movements have usually been modest in either direction, with the market oscillating between small lifts and even slighter falls over most of the year (see our chart above for the contrast between 2021’s large price rises and 2022’s decent falls with 2023’s more meagre movements).
All-up, prices managed a bounce of only about 1.2% over H2 of last year.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
We got the latest on New Zealand Property for December 2023 from the Real Estate Institute of New Zealand.
I love how they spin the release, saying that the December 2023 figures show a notable increase in sales activity, median prices lifting, lower days to sell, and a clear sense of more confidence overall (year-on-year).
This is despite the fact that actually New Zealand house prices edged lower in December, down around 0.3% mom on a seasonally adjusted basis, though trends diverged across the country, ranging from a 1.9% mom fall in Northland to a 4.2% lift in Tasman.
The national average was weighed down by a 0.9% mom price fall in Auckland. Among other big regions, Wellington prices lifted 0.6%, while prices in Canterbury eased 0.1%.
ASB’s commentary on the REINZ figures are helpful here. They say the NZ housing market has struggled to establish a clear direction since the last housing market correction came to an end in around March/April last year. Monthly price movements have usually been modest in either direction, with the market oscillating between small lifts and even slighter falls over most of the year (see our chart above for the contrast between 2021’s large price rises and 2022’s decent falls with 2023’s more meagre movements).
All-up, prices managed a bounce of only about 1.2% over H2 of last year.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Despite the recent recessionary news from New Zealand, low consumer confidence and high interest rates with floating rates around 8.63%, the latest ASB Housing Confidence survey shows that “for the first time in eighteen months, more New Zealanders expect house prices to increase than decrease”. Aucklanders continue to be the most bullish in their house price expectations with a net 39% anticipating prices will rise.
They say more bullish housing market sentiment is very much a New Zealand-wide story. All of the regions we survey are anticipating prices will rise by a net margin of 30-40%. While the housing demand/supply balance varies from region to region, other factors are likely to be driving prices higher – the likelihood mortgage rates are close to peaking and the prospect of a more stimulatory government policy regime – are national in scope.
They conclude, “With recent data generally showing prices no longer falling, Kiwis tend to think the housing market has reached a turning point” Despite this, There’s been little change in the net balance of Kiwis who think now is a good time to buy a house, with that figure unchanged at 6%. Still, that’s a far cry from the mood of the market over much of last year, where by a 20-30% margin, respondents felt it was a bad time to buy.
But the key to this expectation is the high migration flows.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
Despite the recent recessionary news from New Zealand, low consumer confidence and high interest rates with floating rates around 8.63%, the latest ASB Housing Confidence survey shows that “for the first time in eighteen months, more New Zealanders expect house prices to increase than decrease”. Aucklanders continue to be the most bullish in their house price expectations with a net 39% anticipating prices will rise.
They say more bullish housing market sentiment is very much a New Zealand-wide story. All of the regions we survey are anticipating prices will rise by a net margin of 30-40%. While the housing demand/supply balance varies from region to region, other factors are likely to be driving prices higher – the likelihood mortgage rates are close to peaking and the prospect of a more stimulatory government policy regime – are national in scope.
They conclude, “With recent data generally showing prices no longer falling, Kiwis tend to think the housing market has reached a turning point” Despite this, There’s been little change in the net balance of Kiwis who think now is a good time to buy a house, with that figure unchanged at 6%. Still, that’s a far cry from the mood of the market over much of last year, where by a 20-30% margin, respondents felt it was a bad time to buy.
But the key to this expectation is the high migration flows.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
While markets seem to be thinking about coordinated rate cuts next year, the truth is, economies are in very different positions, with New Zealand already looking stagflationary, and the ECB and the Bank of England not sharing the rate cut love exhibited by the FED. Norge Bank lifted this past week, and the RBA is still not close to a cut.
So we think the inflation poker game is fragmenting. The results will still be higher rates for many, for longer than the markets are signalling.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts
