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Low CPI figures point to unchanged NZ interest rate

10-25-2011 11:57 BJT

WELLINGTON, Oct. 25 (Xinhua) -- Lower petrol prices and cheap flights to Asia helped keep New Zealand's consumer price index ( CPI), a main gauge of inflation, to just 0.4 percent in the quarter to the end of September, the government statistics agency announced Tuesday.

Economists said the lower-than-expected figures indicated the country's central bank was unlikely to raise interest rates when it reviews them on Thursday.

"The 0.4-percent increase in the CPI reflects higher food prices and local authority rates (taxes), countered by falls in transport and communication prices," said Statistics New Zealand prices manager Chris Pike.

Transport prices fell 1 percent in the quarter, with petrol prices, which peaked in April, down 3.3 percent, and international air fares down 3.7 percent, reflecting cheaper flights to Asia, said Pike in a statement.

Communication prices also fell by 3.6 percent, reflecting increased data caps for broadband plans and cheaper international calling rates.

However, the cost of housing and household utilities by 0.7 percent, due to higher local authority rates, which rose 4.1 percent, and rents, which were up 0.5 percent.

Food prices rose 1.7 percent with higher than usual prices for vegetables, which were up 18 percent, mainly responsible due to a supply shortage following floods in Queensland, Australia, earlier this year.

In the year to the end of September, the CPI rose 4.6 percent, including a 2.3-percent increase in the December 2010 quarter when the country's goods and services tax, a value-added tax, rose from 12.5 percent to 15 percent.

The leading factors in the rise were transport, which was up 8. 8 percent, food (up 6.2 percent), housing and household utilities (up 3.7 percent), and alcoholic beverages and tobacco (up 5.6 percent).

Petrol prices rose by 18 percent year on year, while the prices of cigarettes and tobacco were up 12 percent), vegetables were up 18 percent, new homes were up 3.7 percent, electricity 4.6 percent, and local authority rates 6.6 percent.

Economists said Tuesday the figures meant the Reserve Bank of New Zealand (RBNZ) was likely to leave interest rates unchanged when it announced its review of the official cash rate (OCR), currently sitting on a record low 2.5 percent, on Thursday.

A weekly statement from the ASB Bank said it expected the RBNZ to leave the OCR on hold till March next year.

"We expect the RBNZ to lift the OCR by 25 basis points in March and at each consecutive meeting, bringing the OCR to a peak of 4 percent. Given the likelihood on ongoing global uncertainty and increased New Zealand household sensitivity to interest rate increases, the risk is the increases in the OCR will be more drawn out, with the RBNZ pausing at some point along the way," said the ASB statement.

A statement from HSBC said the CPI was running at 2.5 percent year on year so inflation remained in the upper part of the RBNZ target band.

"Rates still need to rise, though today's release suggests there may be a bit more time," it said.


Editor:Zhang Rui |Source: Xinhua

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