One-year household inflation expectations eased further in Q4, just as those for businesses did. The RBNZ said in a research report this year that the mean 1-year measure from households has the closest relationship with inflation. Simple correlations are over 80% with both headline and core. It moderated to 5.5% from 6% whereas the median was steady at 5%. The mean suggests that disinflation should continue in Q4 which is good news for the RBNZ. The next meeting is on November 29 and will include updated forecasts.

• The median perception of current inflation eased 0.2pp to 7% but the mean rose 0.6pp to 10.1%.
• Looking further out, 2-year mean household inflation expectations fell 0.1pp to 3.2% but the median returned to the top of the target band at 3%. Median 5-year expectations remain anchored at the bottom of the band.
• The survey also asks about house prices and a net 56.5% of households expect higher prices up from 30.1% in Q3 and 4.5% in Q1. They are expected to rise 2% in a year after flat expectations for some time and 7% in 5-years. Strong population growth driven by immigration is supporting the housing market.

Source: MNI - Market News/Refinitiv/RBNZ