New Zealand forecasters cut their one-year inflation expectation by 81 basis points, in a survey that went into the field the day after inflation printed at 4.1 percent

2.60 percent.

That is where 38 business leaders and professional forecasters now put annual consumer price inflation a year from today, in the Reserve Bank of New Zealand's quarterly Survey of Expectations, published on Thursday. Three months ago the same question returned 3.41 percent. The fall is 81 basis points, it is by some distance the largest move in the release, and it happened in a quarter when the inflation those forecasters were being asked about went the other way.

Annual inflation in the June quarter was 4.1 percent, up from 3.1 percent in the March quarter. Statistics New Zealand published that on 21 July. The survey went into the field on 22 July.

So the respondents had the 4.1 percent figure in front of them when they answered, and they cut anyway.

They also think the cash rate is going higher

The Official Cash Rate is 2.5 percent. It was raised by 25 basis points at the 8 July review, which this site covered at the time.

The mean expectation for the rate at the end of the September quarter is now 2.73 percent, which is 39 basis points above what the previous survey expected one quarter out. A year ahead, respondents put it at 3.21 percent, up from 3.01 percent three months ago. Both readings moved up while the inflation readings moved down. The bank's next Monetary Policy Statement is on 2 September.

The unemployment answer was given before the number arrived

Respondents put the unemployment rate a year from now at 5.24 percent, down 13 basis points from 5.37, and at 4.90 percent two years out.

The document flags the problem with that itself. Collection closed on 28 July. Statistics New Zealand released the labour figures on 5 August, and the seasonally adjusted unemployment rate for the June quarter came in at 5.6 percent, up from 5.4 percent in March. Respondents were therefore forecasting a fall from a level none of them had seen.

Everything else in the survey went up

Wage inflation expectations rose at both horizons, to 2.78 percent a year out and 2.93 percent two years out. Expected growth in real production GDP rose from 1.58 to 2.16 percent one year ahead, and from 2.16 to 2.43 percent two years ahead. House price inflation expectations rose across every horizon the survey asks about, from 0.33 percent to 1.47 percent at one year and from 2.80 to 3.27 percent at two.

The long horizons barely moved at all. Five-year expectations rose 9 basis points to 2.31 percent, and the ten-year reading rose a single basis point, to 2.20 percent. The field work ran for one week, from 22 to 28 July, and was carried out by Research New Zealand on the bank's behalf.