RBNZ tracking

Is the RBNZ on track to keep inflation outcomes within its mandate over the medium term? All signs at iPredict point to yes. Inflation in September quarter is expected to be more than 4.5% and less than 5%, but the GST hike hits year on year CPI changes until September quarter. After that, we find:

• December quarter inflation expected to be more than 2% but not more than 3% (though there's still a 40% chance of the latter)
• March quarter inflation expected to be more than 2% but not more than 3% (and a 34% chance of the latter)
• And, all this despite that the RBNZ is forecast to leave rates alone this go-round and also to leave them alone in October. There's better than even odds of no change in December, but not by a lot; if we add in the chances of a hike in October (which could make a December hike less likely), we're probably looking at even odds of an increase by December. No change is the most likely outcome in each period, but the cumulative chances of no change get smaller. Perhaps more interesting would be a set of contracts on the level of the OCR at each period rather than whether the RBNZ moves.

So inflation hawks might want to head over and make some money if they think the figures are wrong. I'm not going to second guess both RBNZ and iPredict traders on this one.

iPredict also has trading on unemployment and GDP growth. It wouldn't take much to put the figures together for Sumnerean NGDP targeting. Scott Sumner wished that the government would invest a few million dollars in creating markets and subsidizing trading on NGDP futures contracts. I suspect that iPredict runs on a budget just a bit thinner than that. But I'd also expect that RBNZ would need contracts running farther into the future for them to be useful for targeting.