RBNZ Core Inflation Model rises by 2.2% QoQ in Q2 2021, Kiwi revisits highs

The Reserve Bank of New Zealand (RBNZ) released its Sectoral Factor Model Inflation gauge for the second quarter of 2021 after the publication of the official consumer price index (CPI) by the NZ Stats early Friday.

The gauge accelerated 2.2% QoQ in Q2 vs. 2.0% prior. The Q1 figure was revised up to 2.0% YoY from 1.9% last.

The inflation measures are closely watched by the RBNZ, which has a monetary policy goal of achieving 1% to 3% inflation.

FX Implications

The Kiwi dollar catches a fresh bid on the RBNZ’s inflation gauge, as NZD/USD bounces back to test the daily highs at 0.7022. The spot is higher by 0.50% on the day.

About the RBNZ Sectoral Factor Model Inflation

The Reserve Bank of New Zealand has a set of models that produce core inflation estimates. The sectoral factor model estimates a measure of core inflation based on co-movements – the extent to which individual price series move together. It takes a sectoral approach, estimating core inflation based on two sets of prices: prices of tradable items, which are those either imported or exposed to international competition, and prices of non-tradable items, which are those produced domestically and not facing competition from imports.

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