-Jane Turner, ASB economist
New Zealand businesses again cut their inflation expectations over the next two years and did not see the Reserve Bank of New Zealand raising interest rates this year. Firms expect the consumers price index climbing an annual 1.11% in the year ahead, down from the 1.59% rate predicted three months ago, and lowered their two-year expectations to an annual pace of 1.8%, down from 2.06%, RBNZ's survey of expectations revealed. The data followed the central bank's decision to shift from tightening bias to neutral stance and expectations that inflation could turn negative before gradually returning to within the RBNZ's target band of 1%-3%. In the December quarter the nation's consumer inflation climbed just 0.8% annually, missing the RBNZ's 1-3% target bank for the first time in more than a year.
Companies also changed their expectations for real annual growth in gross domestic product. One-year expectations for GDP growth stood at 2.75%, while a two-year growth was seen at a 2.5% rate. They expect the economy expanded at a 0.8% pace in the fourth quarter of 2014 and slowed slightly to 0.7% in the current quarter. Concerning the New Zealand Dollar, the kiwi is predicted to be about 73 US cents at the end of the second quarter and to have depreciated about one cent by the end of the year.
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