Inflation fell 0.2% in the December quarter – below average market forecasts but slap bang-on what the Reserve Bank was expecting.That should forestall any market jitters and should take some pressure – a small degree, at least – off upw
Inflation fell 0.2% in the December quarter – below average market forecasts but slap bang-on what the Reserve Bank was expecting.
That should forestall any market jitters and should take some pressure – a small degree, at least – off upward moves in the overnight index swap (OIS) rate, not to mention the New Zealand dollar.
It should also mean Reserve Bank governor Alan Bollard’s “no interest rate moves until mid-year” stance can be maintained a little more comfortably.
The latest Consumer Price Index, released this morning by Statistics New Zealand, follows increases of 1.3% and 0.6% in the previous two quarters respectively.
The headline annual rate is 2% – or in the middle of the target 1-3% range.
The main downward price moves in the quarter were tomatoes, audio-visual equipment and lettuce.
“It is not unusual to see fruit and vegetable prices fall at the start of summer although this decrease is larger than is usual,” says Statistics New Zealand’s Russell Hewitt.
The main upward moves were in transport and clothing and footwear. Other rises were under 0.5%.
Inflation in the overall tradables sector – the part of the economy exposed to export markets – fell 0.5%, or 1.5% for the year.
The non-tradables sector – of which the key parts or central and local government and housing – fell 0.5%.
That will also be of relief to Dr Bollard, who has frequently voiced concern about the inflationary pressures in this area.
The annual figure is 2.3% - the lowest since December 2001. That though is still a little on the high side of the overall inflation target band.
