Mike Jones: BNZ Chief Economist on the CPI data for Q1 releasing today amidst the Middle East crisis

Today's inflation numbers won't reflect the full impact of the war in the Middle East. 

The first quarter of this year's expected to show a dip in annual inflation after 2025 ended with a rate of 3.1%.  

Bank economists are predicting an inflation rate between 2.8 and 3.1%. 

BNZ Chief Economist Mike Jones told Mike Hosking despite not showing the current picture, there will still be some interest in today’s numbers – particularly the core inflation figures. 

He says that if they ease, it’ll give the Reserve Bank a bit more rope to look through some of the shock, and if they strengthen, it’ll probably excite those calling for earlier rate increases. 

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Episode Transcript

Speaker 1 (00:00):
CPI today Q one consumer price index. Of course, inflation
for Jen Feb and March good news, mostly down or
most likely down it was three point one. It's also
pre war now. Mike Jones is the ben zi's chief
economists back, whether it's Mike morning to you, good morning.
What do you got zero point eight?

Speaker 2 (00:16):
Yeah, we've got three percent on the annual figure, so
ill slight down from last quarter. But as you said,
I mean this is sort of dated to some degree,
and the big spike in inflation that we're expecting on
the back of fuel prices will come through in this quarter.
Q second, Yeah, exactly.

Speaker 1 (00:32):
So what does today mean of anything? It's just we
remind ourselves of what once was until somebody started bombing around.

Speaker 2 (00:39):
Yeah, sort of references happier times, I suppose in the
economy and for inflation, I think that there will still
be some interest in today's numbers, particularly the core inflation measures.
I mean, they are coming from a position where they're
probably already a bit high, and so there'll be a
tension on what those do if they ease off a bit.
I mean, that will provide I think the reserve had

(01:00):
a bit more rope to be able to look through
some of this shock, and if they don't, and if
they strengthen, well that will probably get those calling for
earlier rate increases excited.

Speaker 1 (01:10):
Do you see? I know you correct me if I'm wrong.
You've got us peaking at four point one. Eventually you're
calling three cash rate rises. Maybe you're saying, where are
you sitting with that May July thing?

Speaker 2 (01:21):
Well, we're calling September for the first yea, yeah, we are.

Speaker 1 (01:25):
What I've got here is July, September, October. Someone missed
reporting that.

Speaker 2 (01:29):
Oh that sounds like another bank you know where at September.
And we've actually held that view since before this conflict
kicked off. So we're at September and we've got two
baked in for this year.

Speaker 1 (01:40):
Right, So you're holding firm on that new confident with that.

Speaker 2 (01:44):
I wouldn't say we're confident. It's more that we just
haven't had haven't had conviction to move it. We were there,
as say prior. We're obviously assessing, like everyone, some of
the impacts from this thing, and for the meantime, we
haven't had sufficient condition conviction to change.

Speaker 1 (02:01):
Okay, if you got four point one, there is a
peak for inflation four point five. You're going four point
five now, so the information I've got materially wrong. So
you at four point five. I was going to say
you're conservative, but you're not. Now you're with a lot
of other people. I mean, informatry has got your four
point eight. But at four and a half, how confident
are you on that?

Speaker 2 (02:19):
Well, it's looking pretty likely it's above above four. I mean,
you know, there's still a bit of quite a bit
to go in the current quarter, and hence room for
fuel prices and the overall inflation pulse to move around
a bit. I mean, we add obviously changing those numbers
pretty regularly in response to our assumptions on picture and
diesel prices moving around. So that's our best guess at

(02:41):
the moment.

Speaker 1 (02:42):
Call me naive, but I'm relatively bullish about this whole
war thing in context. Obviously, I don't think they're going
to start fighting, and I think a deal will be
done very shortly, and I think the strait will open
if that happens to play out. How long do you
think before it plays through to some form of normality.

Speaker 2 (03:03):
Well, that's it's a big question. I mean, I think
it's going to take some time. As people talked about before,
to restore supply chains around fuel and then what that
means of course for supply and ultimately picture prices in
this country. So you know where we have made in

(03:24):
terms of that four and a half percent inflation projection.
I mean, that's built on some pretty conservative assumptions actually,
where picture prices start falling quite rapidly and quite quickly,
so arguably, I mean, that sort of scenario is kind
of already built into what a lot of us are forecasting.

Speaker 1 (03:39):
Good stuff. Mike, appreciate it very much. Mike Jones being
ZAID Chief Economists.

Speaker 2 (03:43):
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