- ASB
New Zealand inflation rose in the first quarter, recovering from the lowest level in 15 years, but remained below the range the Reserve Bank of New Zealand targets, providing the central bank with room for further interest rate cuts. New Zealand's CPI climbed 0.2% in the January-March period, Statistics New Zealand reported, coming in stronger than the median forecast of zero change and much higher than the 0.5% decrease seen in the previous quarter. The main contributor to the surge came from an increase in an excise duty, with cigarette and tobacco prices advancing 9.4% over the reported period, making a 0.25 percentage point contribution change to the headline measure. In addition to that, price increases for strawberries, kiwifruit, and oranges helped lift fruit prices 8.2%.
Tepid inflation means there is little hurdle to Governor Graeme Wheeler lowering the official cash rate if needed after cutting it to a record-low 2.25% in March. Market participants are betting on lower borrowing costs as falling oil prices and the New Zealand Dollar's 6.5% gain in the past three months threaten to delay the return of the nation's inflation to the middle of the RBNZ's 1-3% target range. The central bank will review the official cash rate on 28 April.
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