Other economists are picking 1.5% for the quarter and an annual rate of 4.1%.

Regardless, the significant concern for the Reserve Bank would be that increased fuel costs spill over into broader inflation pressures in the economy, Westpac senior economist Satish Ranchhod said.

“With that in mind, measures of core inflation will be a key focus,” he said.

Core inflation excludes large swings for volatile products like food and fuel.

He expected the annual rate to be 2.8%, excluding fuel inflation, or 2.5%, excluding fuel, food and household energy.

Ranchhod said he was reluctant to describe those figures as “low”.

“Despite a sharp slowdown in economic growth and softness in the labour market, the various measures of core inflation have lingered above the 2% midpoint of the RBNZ’s [Reserve Bank] target range for an extended period.”

Economists expressed some optimism that fuel prices had initially fallen in the third quarter, but renewed conflict in the Middle East was threatening to undo that.

Fuel prices remained the ”wild card”, BNZ senior economist Doug Steel said.

“Domestic fuel prices started July a bit lower than we had assumed,” he said.

“But renewed hostilities in the Middle East suggest some upside risk ahead, compared to our prevailing assumption of a continued drift lower in fuel prices.”

The combination of these two developments might mean that fuel price outcomes ended up close to BNZ’s original forecasts in the third quarter, he said.

As was typically the case, signals from non-tradeable services and core inflation would be most relevant for monetary policy, providing a fresh starting point for underlying inflation pressures, ANZ senior economist Miles Workman said.

The RBNZ provided a second-quarter headline inflation forecast of 3.9% in the July Monetary Policy Review, but did not publish the tradeable/non-tradeable split, Workman said.

The May Monetary Policy Statement forecast for headline inflation was 4.2%, with non-tradeable inflation falling 0.1 of a point to 3.4%.

“The question then becomes how much firms pass on any fuel price declines over the coming quarters, assuming fuel prices remain contained, which is looking like a bigger assumption by the day,” he said.

“On that score, recent RBNZ communications suggest concern that firms’ pricing behaviour is not symmetric – quick to pass on cost increases, but slow to pass on decreases."

In a speech last week, RBNZ chief economist Paul Conway said New Zealand businesses had also become more likely to increase prices when costs increased, and less likely to cut them when they fell.

Firms were “quicker to pass through rising costs than to reverse price increases as inflation recedes”, he said.

Conway also noted that advances in digital technology had “made it cheaper and easier for firms to review and change prices, allowing them to respond more quickly to shifts in inflation expectations, actual costs and broader economic conditions”.

If that proved to be the case, and inflation pressures remain above the RBNZ’s assumptions, the Monetary Policy Committee might need to lift the Official Cash Rate more than it otherwise would have, ANZ’s Workman said.

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.

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