Petrol prices, food prices, and inflation perceptions in New Zealand—Evidence from a threshold analysis

Abstract

Inflation perceptions shape inflation expectations. However, little is known about the factors influencing these perceptions. In this study, we address this gap by employing threshold regressions to analyze the associations between changes in petrol and food prices—two of the most conspicuous prices—and inflation perceptions in New Zealand. Findings reveal a positive association between petrol and food price inflation on the one hand and inflation perceptions on the other, with some evidence suggesting closer associations for food price inflation. Furthermore, the relationships do not change when high inflation rates are considered instead of low inflation rates. Finally, inflation perceptions are more closely related to petrol and food price inflation over the previous year than just the most recent quarter.