Inflation expected to have become more domestically driven

Most bank economists believe Stats NZ data out on Wednesday will show consumer inflation fell very slightly in the December quarter, from 7.2 per cent year-on-year in the September quarter. This will really concern the Reserve Bank, given it is domestic price pressures that it can influence. Indeed, economists see non-tradeable (domestic) inflation coming in stronger than tradeable (imported) inflation. Meanwhile, BNZ and Kiwibank economists believe it will opt for a 50-point lift. Kiwibank economists believe labour market conditions should loosen in the second half of this year, with the unemployment rate steadily rising.