New Zealand CPI Response: ASB forecasts first RBNZ rate cut in February 2025, starting in November 2024

ASB response to data earlier:

This article highlights very strong inflation of non-tradable goods. Services inflation also remains high.

The RBNZ should continue to rise for longer, as the ASB hopes.

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“Tradable” and “non-tradable” inflation are terms used to describe different aspects of inflation depending on the nature of the goods and services involved.

1. Tradable inflation:

   • Definition:Tradable inflation refers to the inflation of internationally traded goods and services.
   • Examples: Commodities like oil, metals, agricultural products, and manufactured goods like electronics and automobiles.
   • Features: Prices of tradable goods are often influenced by global market conditions, exchange rates, and international dynamics of supply and demand. For example, if the price of oil increases globally, this will lead to marketable inflation in oil-importing countries.
   • Impact: Inflation of tradable goods can be significant for countries that rely heavily on imports or exports. Changes in exchange rates can also have a significant impact on inflation of tradable goods.

2. Non-Tradable Inflation:

   • Definition: Non-tradable inflation refers to the inflation of goods and services that are not internationally traded.
   • Examples: Services such as health care, education, and local utilities, as well as goods with high transportation costs relative to their value, or those that are typically consumed where they are produced.
   • Features: Prices of non-tradable goods and services are mainly influenced by national factors such as local wage levels, property rents and national policies. These prices tend to be more stable than those of tradable goods, but can vary considerably from country to country.
   • Impact: Inflation of non-tradable goods is more directly controlled by national monetary and fiscal policies. It is less subject to external shocks but can be influenced by national factors such as labor market conditions and local regulatory changes.

In summary, tradable goods inflation is mainly determined by international factors and market conditions, while non-tradable goods inflation is determined by domestic economic conditions and policies.

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