New Zealand businesses see inflation creeping up over the coming year, but their longer term expectations remain anchored around the middle of the central bank's target range.
Firms see the consumers price index reaching 2.09 per cent over the next 12 months, up from the 1.86 per cent they predicted in the Reserve Bank's September quarter survey. Two-year-ahead inflation expectations eased to 2.03 from 2.04 per cent, the midpoint of the central bank's 1-to-3 per cent target band.
The result reinforces expectations the central bank will continue to signal rates are on hold for the foreseeable future at tomorrow's review.
New Zealand's inflation has been muted in recent years, with a strong currency and flat wages helping restrain price increases. This has allowed the Reserve Bank to keep the benchmark rate at a record low 1.75 per cent level.
Today's survey shows a net 63.8 per cent of respondents believe current monetary conditions are "easier than neutral". This setting indicates a stimulatory economic environment. That is down from a net 75 per cent in the preceding quarter's survey. A net 52.2 per cent of respondents believe monetary conditions in one year's time will be easier than neutral.
