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Why has inflation in New Zealand been low?

Nikki Kergozou, Satish Ranchhod

Over the past 18 months, inflation in New Zealand has been surprisingly low, even as GDP has strengthened and many measures of excess capacity in the economy have tightened largely as expected. Unexpected strength in the New Zealand dollar, which has reinforced strong domestic and international competitive pressures, has been a key part of the story. Falls in inflation expectations and softness in wage inflation have also contributed.