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New Zealand

Inflation war ‘not likely to end’ – The Economist

Informatics chief economist Brad Olsen told The Morning Report on Friday that their modeling shows inflation remains stubbornly high.

A decline in inflation in a major trading partner should not be taken as a guarantee that US inflation will also begin to decline, a prominent economist warns.

New Statistics NZ figures released on Thursday show food price inflation is at its highest level in almost 33 years, up 11.3% year-on-year.

on the other hand, we [https://wwwtheguardiancom/business/2023/jan/18/uk-inflation-dips-people-continue-to-feel-pinchTheUKhasseenasimilarincreaseinfoodcostswithoverallinflationTheeconomyappearstobeeasing[https://wwwtheguardiancom/business/2023/jan/18/uk-inflation-dips-people-continue-to-feel-pinchUKareexperiencingsimilarhikesinthecostoffoodoverallinflationratesinbotheconomiesappeartobeeasing[https://wwwtheguardiancom/business/2023/jan/18/uk-inflation-dips-people-continue-to-feel-pinch英国でも同様の食料費の上昇が見られ、全体的なインフレ率は両方の経済は緩和しているように見えます。[https://wwwtheguardiancom/business/2023/jan/18/uk-inflation-dips-people-continue-to-feel-pinchUKareexperiencingsimilarhikesinthecostoffoodoverallinflationratesinbotheconomiesappeartobeeasing

US numbers are It fell from a 10-year high of 9.5% in June to 6.5% in December.Meanwhile, in the UK, the consumer price index fell for the second straight month, falling to 10.5% in December from 11.1% in October.

Brad Olsen, Principal Economist at Informatics, said: morning report Their modeling on Friday shows that inflation remains stubbornly high by recent historical standards.

“Informatics now expects inflation to flatten out at an annualized rate of 7.2% on an annualized basis, which will increase by a further 1.4% each quarter.

“So there is still a lot of pressure on the system. Remember, a quarterly increase of more than 0.5% means you’re well above the Reserve Bank’s target.”

The Reserve Bank’s main job is to keep inflation between 1 and 3%. The latest monetary policy statement released in November predicted that the recession starting in 2023 would be “extended for several quarters”, with GDP contracting “by about 1%” at its worst.

Brad Olsen

Brad Olsen
photograph: tom farley

This “will be part of the consequences of higher interest rates” imposed by banks, but the monetary policy statement has warned of other major economies, along with “significant headwinds” affecting the Chinese economy and Europe’s energy crisis. It is also linked to recessions, he said. This is thanks to Russia’s invasion of Ukraine and consumer spending declining as “savings accumulated during the Covid-19 lockdown” ran out.

As spending falls, inflation should fall as well, but Olsen said it may not happen as quickly here as abroad.

“That’s because it’s early this week. Seen from NZIER’s quarterly business opinion survey Firms are not only expecting increased costs to their businesses, but also the need and expectation that firms will continue to raise prices at very high and very intense levels.

“For a decade or so after the global financial crisis, companies were very reluctant to raise prices because they knew they would lose market share. You have to, or you might go out of business.”

Olsen points to Australia, where inflation is about the same as here, and was still rising in the last reading for the third quarter of 2022.

“At the moment, looking at the dialogue with businesses, looking at all the numbers, I don’t think there is any evidence right now that New Zealand inflation has peaked and will roll over anytime soon.

“And more importantly, it may take quite some time to remove the entire percentage point of economic activity before the recession returns…

“The fight against inflation is far from over,” he said.

https://www.rnz.co.nz/news/business/482788/inflation-battle-nowhere-near-over-economist Inflation war ‘not likely to end’ – The Economist

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