NZ inflation slowed

  • 12/10/2015

New Zealand inflation probably slowed in the third quarter, keeping the annual rate below the Reserve Bank's target band for a fourth straight quarter and giving the bank more reason to cut interest rates again.

The consumers price index fell to 0.2 percent in the third quarter from 0.4 percent three months earlier, according to a Reuters survey.

The annual rate may also have slowed to 0.2 percent, the figures scheduled for release on Friday are expected to show.

Annual inflation hasn't been within the central bank's 1-3 percent target range since the third quarter of last year, when it scraped in at 1 percent.

The bank cut the official cash rate a quarter point to 2.75 percent at the September 10 monetary policy statement and next reviews rates on October 29, before the next full MPS on December 10.

Helping keep a lid on consumer prices in the third quarter was the Accident Compensation Corp's change to "vehicle risk ratings" to calculate ACC motor vehicle levies on July 1, reducing the levy portion of vehicle registration by $40-$170. Subsidised doctor visits would also weigh on inflation. Against that was a hike in local authority rates, especially in Auckland and Wellington.

"New Zealand's run of very subdued inflation is likely to continue with next Friday's release of the September quarter CPI figures," said Michael Gordon, senior economist at Westpac.

He is forecasting inflation of just 0.1 percent in the third quarter for an annual 0.2 percent rate, "which we think will mark the low point of this cycle".

There's a 78 percent chance of an October cut to the OCR, based on the overnight interest swap curve, with a total 38 basis points of reductions seen over the next 12 months.