The latest inflation figures provide further ground for the Reserve Bank to keep its interest rates guns holstered for now.The Consumer Price Index (CPI) March, released by Statistics New Zealand this morning, was 0.4% for the month and 2% for the year &n
The latest inflation figures provide further ground for the Reserve Bank to keep its interest rates guns holstered for now.
The Consumer Price Index (CPI) March, released by Statistics New Zealand this morning, was 0.4% for the month and 2% for the year – slap bang in the middle of the 1-3% target band.
The result was slightly above the Reserve Bank’s own forecasts – which had it at 0.3% for the quarter – but below the consensus market economist forecast of 0.6%.
Reserve Bank governor Alan Bollard reviews the official cash rate again next Thursday.
His present stance is that there is no need for a rate rise until “around the middle” of the year – a broadly worded stance which could mean anything from now through to September.
And although some economists have been calling for Dr Bollard to “go early” those voices have been growing rather more still of late.
The latest CPI follows a decrease of 0.2% in the December quarter and a 1.3% rise in September.
But when the figures are examined there is even less sign of inflationary stimulus requiring any premature hikes of the OCR.
The main area of price rises is fuel – petrol prices are at their highest levels for 18 months.
“If petrol had remained unchanged the CPI would have remained unchanged for the March quarter,” Statistics New Zealand’s Russell Hewitt said.
One thing fuel price rises tend to do is cause people to spend less elsewhere: in other words, they can have a contractionary effect on the economy.
Which is another reason Dr Bollard can afford to wait until the middle of winter or maybe even the spring before any rate rises.
