RBNZ survey has shown an easing in expectations of inflation - something that will cause the RBNZ comfort as it prepares for its next Official Cash Rate decision later in the month

Another box has been ticked on the way to the Reserve Bank (RBNZ) cutting the Official Cash Rate (OCR) again at the next review on August 20.

Results of the latest Survey of Expectations, carried out quarterly for the RBNZ show that the expectations for the future level of inflation have settled - after rising very sharply in the previous survey.

The latest survey result shows the level of inflation in two years' time is expected by respondents (mean measure) to be 2.28%, which is down from 2.29% in the last quarter's survey. The two-year timeframe result is the one the RBNZ watches most closely. The two-year expectation had increased from 2.06% in the February survey to the 2.29% reading seen in the last quarter - which would have been disconcerting for the RBNZ.

Ideally, the RBNZ wants to see expectations of future inflation 'anchored' somewhere near 2% - this being the explicitly aimed-for 'midpoint' of the RBNZ's 1% to 3% inflation target range. Expectations of high inflation are something the RBNZ keenly wants to stamp out - since such expectations can in themselves actually fuel future inflation, because people raise prices in anticipation of inflation...which causes inflation. So, a moderation in inflation expectations is most welcome for the RBNZ. 

In other key results in the latest survey, the one-year expectation for inflation fell to 2.37% from 2.41%, the five-year expectation actually rose to 2.26% from 2.18% and the 10-year stayed the same at 2.15%.

But these are results that would be seen as very satisfactory for the RBNZ and, taken just on their own, would provide a clear green light to cut the OCR from the current 3.25% to 3.00%.

Ahead of the August 20 review the RBNZ's been faced with an interesting juggling act because inflationary pressures have been building again. That's been perhaps most notable in food prices, which rose by 4.6% in the 12 months to June, although overall inflation as measured by the Consumers Price Index (CPI) increased by a little less than was expected in the June quarter to an annual rate of 2.7%. This, however, is close to the top of the RBNZ's targeted 1% to 3% range.

But weighed against this is evidence that the economic growth seen early in the year (GDP increased 0.8% in the March quarter) may have stalled in the June quarter. The BNZ-Business NZ Performance of Manufacturing (PMI) and Performance of Services (PSI) indexes, for example, are showing results that according to BNZ economists are "consistent with an economy in recession". 

The unemployment figures for the June quarter out this week showed a rise to 5.2% from 5.1%. And while the rise was slightly less than expected, the detail in the data clearly pointed to a very weak labour market - and definitely provided a positive nudge to the RBNZ towards making an OCR cut on August 20.

This survey has in the past been something the RBNZ has paid a lot of attention to, and clearly at times the results of it have had a big influence on subsequent OCR decisions. However, its fair to say, while the RBNZ will have a good look at the latest result, the influence of this survey is now waning - and one reason would be its low response rate. 

The data for this quarter was obtained from 40 business leaders and professional forecasters by Research New Zealand – Rangahau Aotearoa on behalf of RBNZ. Field work for the survey was run between the 22nd and 28 July 2025 after the release of the most recent inflation figures. 

The RBNZ has been putting renewed emphasis more recently on its revamped Household Expectations Survey  - with the next one due out on August 14. But the survey the RBNZ is clearly looking to become its 'big' one in the future is the  new quarterly Tara-ā-Umanga Business Expectations Survey, which has a big and broad sample size. The first one of these was released in May and the next one is due on August 18, just ahead of the next OCR review. And it’s likely the result from that one will have more sway with the RBNZ's  Monetary Policy Committee (MPC) as it deliberates whether to reduce the current OCR of 3.25% down to 3.00%.

There's no doubt though that the MPC will enjoy having the results of three surveys with differing demographics to inform its decision.

It's a case of one-down, two-to-go, but so far, so good.