The Reserve Bank (RBNZ) is denying that New Zealand is experiencing 'stagflation' and expects domestic inflation to continue falling as "increasing spare capacity" occurs in the economy this year. Lower inflation expectations and a lower propensity for firms to make relatively large price increases will help lower inflation persistence," Conway said. "Second, we expect households and firms to increasingly build lower inflation expectations into their wage- and price-setting decisions. Because inflation expectations can become self-fulfilling, lower inflation expectations will help reduce inflation persistence." Conway said the RBNZ research had found that above-target inflation over recent years prompted people to pay more attention to recent inflation and to update their inflation expectations more frequently.

Source: Stuff June 19, 2024 01:17 UTC