- Jane Turner, senior economist at ASB Bank in Auckland
New Zealand's inflation rose at a stronger pace than economists had expected, but held below the central bank's target range for a fourth quarter, adding to signs Governor Graeme Wheeler will slash interest rates again. The consumer price index climbed 0.3% in the third quarter, Statistics New Zealand reported, coming in better than the market consensus of a 0.2% rise. Vegetable prices were the biggest contributor to price growth last quarter, soaring 14%. Measured on an annual basis, consumer inflation rose 0.4% in the reported period.
Benign inflation coupled with slowing economic growth reinforce the view the Reserve Bank of New Zealand will cut the official cash rate to 2.5% this year in an attempt to return cost of living to the middle of the 1%-3% target band. However, economists and analysts are divided on whether Governor Wheeler, who has already slashed interest rates three times since June, will move at the central bank's upcoming meeting on October 29 or postpone the decision until December. The Reserve Bank is concerned of the impact of low rates on the housing market and how that feeds into inflation, and will also consider the need to have scope to cut borrowing costs if the global economy slows significantly.
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