"It now looks more clear the last quarter print was the bottom of the cycle. It keeps the pressure on the Reserve Bank to hike by March."
- Imre Speizer, market strategist at Westpac Bank in Auckland.
New Zealand's inflation rose more-than-expected in the third quarter, ending a one-year long streak of subdued price pressure and supporting the Reserve Bank of New Zealand's case to start hiking interest rates in 2014. Consumer prices increased 0.9% from the April-June period, when they inched up 0.2%, according to Statistics New Zealand. Economists, however, predicted a 0.8% rise. The annual pace of inflation accelerated to 1.4%, back within the RBNZ's target range of between 1% and 3%, from 0.7% in June, the slowest pace in 14 years. The rise of consumer prices was underpinned by a 5.6% lift in petrol prices, the biggest quarterly gain since march 2011, and 20% jump in vegetable prices.
The sticky pace of inflation has allowed the nation's central bank not to hike the official cash rate from a historic-low 2.5% as a bubbling property market has not spilled over into increased consumer spending. The RBNZ appeared to be reluctant to lift the interest rate as it might stoke investors to buy the New Zealand Dollar, further strengthening an overvalued currency. Nevertheless, the RBNZ signalled about the potential key benchmark interest rate hike next year, while analysts predict that the central bank will start lift its key rate already in March. The kiwi traded at 83.91 U.S. cents, from 83.75 cents immediately ahead of the release.
© Dukascopy Bank SA