WELLINGTON: New Zealand consumer prices rose more-than-expected in the September quarter of this year, creating some doubt as to whether the Reserve Bank of New Zealand will cut interest rates again in November.
According to Statistics New Zealand, consumer price inflation (CPI) rose by 0.2% over the quarter, exceeding the median economist forecast that was looking for no change from the June quarter. “Higher housing-related prices were countered by lower transportation prices,” said Matt Haigh, consumer prices manager at SNZ. “Housing and household utilities prices rose 1.1 percent in the September 2016 quarter. This rise was influenced by higher prices for purchase of new housing, excluding land, and local authority rates.”
Offsetting strength in housing-related prices, transport prices fell 3% on the back of weaker petrol and vehicle licencing costs. As a result of the quarterly increase, it left the year-on-year inflation rate at 0.2%, above the 0.1% level expected. SNZ said that tradable prices — those influenced by global factors — fell by 2.1% over the past year, offsetting a rise in non-tradable inflation — primarily influenced by domestic factors — of 2.1%.
While above forecast, it was down on the 0.4% annual increase registered in Q2. It also remains well below the 1-3% inflation band targeted by the Reserve Bank of New Zealand (RBNZ). Despite CPI coming in slightly ahead of expectation, most economists remain confident that it will still be enough to see the RBNZ deliver another 25 basis point rate cut in November.
“Today’s result is consistent with our expectation for a 25 basis point reduction in the official cash rate in November,” Westpac Bank Acting Chief Economist Michael Gordon told Reuters. Nick Tuffley, ASB chief economist, agrees, noting that the result was “just higher than the 0.1 percent quarter-on-quarter that the RBNZ was forecasting though in line with its annual expectation”. Despite those expectations, the New Zealand dollar has surged higher following the release, rising to as high as .7184 against the US dollar before easing in recent trade.
