For the first time in more than two years in the fourth quarter, increased fuel prices may have pushed New Zealand’s annual rate of inflation back above 1%.
However, according to BusinessDesk, the economists which it spoke to, say that the rise in inflation won’t have any impact on interest rates.
A BusinessDesk poll reports economists expect inflation was 0.2% in the final three months of 2016 for an annual rise of 1.2%, according to the median.
It says the Reserve Bank of New Zealand (RBNZ) believes annual inflation will be 1.1% in the fourth quarter. The consumer price index rose 0.3% in the third quarter of last year bringing the annual rate to 0.4%. Annual inflation has not been higher than 1% since the September 2014 quarter.
Fuel-driven inflation isn’t unique to New Zealand as the price of crude oil has recovered from its slump in 2015 reports BusinessDesk.
US consumer prices jumped above 2% for the first time in two-and-a-half years last month, according to consumer-price index data released this week.
The increase will cheer the RBNZ, which has the Government’s mandate to keep inflation in a 1%-to-3% target band.
“The RBNZ will take some comfort from the return of the target band, but the renewed strength of the New Zealand dollar means that inflation will remain subdued for some time yet,” says Westpac Banking Corp acting chief economist Michael Gordon.
“Also, with inflation still at the lower end of the range and likely to remain so for a while longer there’s no case for withdrawing the monetary stimulus that the RBNZ has applied over the past couple of years,” says Gordon.
Westpac told BusinessDesk it is expecting a 0.2% increase in CPI for the quarter, which will bring annual inflation to 1.2%.
