Podcast Appearances
So monetary policy works with a lag.
We'll wait for the lags to work through.
Just at the moment, it feels like some of the commentary has forgotten about that.
And, you know, we're all going, oh, 3.1%, it's above target.
Well, gee, you know, let's all sort of start panicking.
Keep in mind there's still lags in the system and it takes a while to flow through.
So, yeah, I'd keep that in mind too.
Now, I need to come back to my overall conclusion on all of that.
So core inflation, you're taking out stuff that's a bit jumpy, a bit volatile.
So, yeah, things like food, petrol prices, you know, they can jump up and down for,
For various reasons, food prices could go up because of a weather event or that sort of thing, which obviously we're experiencing at the moment.
One-offs, I mean, things like, say, GST tax changes, things like that, that, you know, yep, it's captured in the CPI, but it's not necessarily a sort of underlying or trend thing.
Now, it also matters because the Reserve Bank's allowed to sort of look through those things and focus on the underlying trend.
So you probably want to have a measure of underlying trend.
But also, I think there's a school of thought that says inflation expectations are also driven by inflation.
theoretically an underlying trend number now i'd i'd be a little bit cautious of that about that because i think probably what inflation expectations are also driven by is what people see in the newspapers and you know us talking about and that's the headline inflation rate you know they see 3.1 above um above target and go oh inflation's out of control and that that drives their expectations so yeah it might be about underlying or core inflation but also i think it's
going to be about headline two so i probably wouldn't overplay that but there is a school of thought that says inflation expectations are driven by by core inflation and of course inflation expectations are what the reserve bank pays attention to as well because you know they're really conscious of well if people think prices are going to go up in future maybe they will go up so we want to keep not only actual inflation but also inflation expectations under control
So all of those things, I think, are background.
What are some of the measures?
Well, Stats New Zealand has in their detailed spreadsheets, they have a measure they look at which takes out food, household energy and vehicle fuels.