The RBNZ 'Sectoral Factor Model Inflation Gauge' is one of the bank's preferred measures of core inflation

  • Its at 1.5% for Q3
  • Q2 was also 1.5% (revised down from 1.6%)

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What is the Sectoral Factor Model Inflation Gauge? In brief (I summarised this from RBNZ info)

  • 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

And ... it gets more complicated from there ...