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Exorcising New Zealand’s inflation demon

  • NZ inflation has rapidly accelerated and the RBNZ has started to raise rates to exorcise this demon
  • We think inflation pressures go beyond transitory and will require further policy tightening
  • This carries risks for asset prices and the latest Omicron COVID-19 variant suggests some volatility is likely along the way
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Hamish Pepper | Posted on Dec 7, 2021
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Inflation risks building

  • Inflation is likely to surge through the Reserve Bank of New Zealand’s (RBNZ) 2% target in the coming months, reflecting mostly temporary factors that could easily reverse.
  • But there is a risk that inflation becomes more persistent, something the market may be underestimating.
  • We think medium-term inflation risks are skewed to the upside and have positioned portfolios accordingly.
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Hamish Pepper | Posted on Apr 23, 2021
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When will central banks react to inflation?

  • Higher inflation and the prospect of a reduction in central bank support is becoming a concern among financial market participants.
  • We think this risk is low given most economies have spare capacity that is keeping unemployment rates higher and inflation lower than central banks desire.
  • The ongoing threat of higher inflation and reduced monetary stimulus, however, is likely to lead to choppy trading conditions as investors manage the transition away from the low inflation and falling interest rate environment seen in recent years.
  • We hope that the following Q&A gives you an insight into our thought process.
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Hamish Pepper | Posted on Jan 29, 2021