RBNZ survey shows expectations of the future level of inflation have barely changed and remain 'anchored' near 2% despite the rise in actual annual inflation to 3%

For once, in a topsy turvy year, it was the good news the Reserve Bank (RBNZ) was looking for ahead of its last Official Cash Rate (OCR) decision for 2025 on November 26.

Results of the latest Survey of Expectations, carried out quarterly for the RBNZ show the expectations for the future level of inflation have barely changed from the previous survey despite an actual rise in the level of reported annual inflation to 3%.

The latest survey result shows the level of inflation in two years' time is expected by respondents (mean measure) to be 2.28% - the same as in the last quarter's survey. The two-year timeframe result is the one the RBNZ watches most closely. This result would indicate that the business leaders and professional forecasters who responded to this survey do believe that the current spike in inflation will be short lived.

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.

The RBNZ will have been concerned that the spike in inflation this year could begin to fuel inflation expectations, so, the results of this survey will be most welcome.

And, crucially, there's nothing in this survey likely to put off the RBNZ from a further, largely expected, cut to the OCR.

Westpac senior economist Satish Ranchhod said the stability in inflation expectations "is notable" given the rise in headline inflation back up to 3% in the September quarter. 

"Inflation is expected to drop back over the coming months as the earlier strength in food prices ease. And with inflation expectations looking well contained inside the 1 to 3% target band, the RBNZ will be feeling comfortable that inflation will remain contained over the year ahead. That’s being reinforced by the continued soft activity and the labour market," he said.

"That combination of conditions gives the RBNZ scope to cut the OCR again at their upcoming 26 November policy meeting. We’re forecasting another 25bp cut, which would take the OCR to 2.25%."

In other key results in the latest survey, the one-year expectation for inflation rose from 2.37% to 2.39%, the five-year expectation dropped by 4 basis points from 2.26% to 2.22%, while the 10-year-ahead inflation expectations increased by 3 basis points from 2.15% to 2.18%.

The survey also takes a reading of house price expectations. And these were pretty muted as well.

One-year-ahead annual house price inflation expectations decreased from 2.87% to 2.39%. The expectation for annual house price inflation in two years’ time decreased from 3.86% to 3.47%.

The data for this quarter were 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 October 21 and 28, 2025 after the September quarter inflation figures (showing the rise to 3.0%) had been released.

The RBNZ has been doing a lot of work on its surveys and this one released on Tuesday is the first of three to be released before the OCR decision.

The RBNZ has been putting renewed emphasis more recently on its revamped Household Expectations Survey  - with the next one due out on November 17. 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 large and broad sample size. The next one is due on November 18.