RBNZ: 3Q Sectoral factor model inflation index rises 1.5% y/y

RBNZ’s one of the most preferred core inflation gauge, the Sectoral Factor Model Inflation Index surprised to the upside, rising 1.5% y/y for Q3. While RBNZ core inflation gauge remained unchanged from revised 1.5% in 2Q.

Summary from RBNZ:

Core inflation excludes one-off or highly volatile price movements

Central banks use core inflation measures to assess what is happening to "underlying" inflation

The Reserve Bank of New Zealand has a set of models that produce core inflation estimates

The sectoral factor model estimates a measure of core inflation based on co-movements – the extent to which individual price series move together. It takes a sectoral approach , estimating core inflation based on two sets of prices: prices of tradable items, which are those either imported or exposed to international competition, and prices of non-tradable items, which are those produced domestically and not facing competition from imports

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