It was also below economists' expectations in a Reuters poll for a 7.1% annual rise and the Reserve Bank of New Zealand’s forecast of 7.3% inflation. Inflation remains a significant challenge for the Reserve Bank of New Zealand (RBNZ) and many other central banks globally, as the Ukraine war and supply chain issues have lifted prices for everything from consumer goods to commodities. The RBNZ has responded by raising interest rates to 5.25% from a record low 0.25% in October 2021, and has signaled a further increase to rein in inflation expectations.
“We think it’s a bit of a stretch to think today’s data will give them good reason to blink before taking the OCR to 5.5%,” ANZ senior economist Miles Workman said in a note.
The main drivers of the annual inflation, which is still
not far off the three-decade highs of 7.3% reached in the second
quarter of 2022, were rising prices for food and the building of
new houses, Statistics New Zealand said.
"Inflation is still at levels not seen since the 1990s,"
said Nicola Growden, the prices senior manager at Statistics New
Zealand.
The New Zealand dollar fell after the release of the data to
around $0.6170 from around $0.6205 earlier as markets reacted to
the softer than expected number.
The tradeable price basket – goods and services that are
imported or in competition with foreign goods – contributed to
the lower headline inflation while the non-tradeable component,
which tends to be more sticky, hit its highest level in more
than three decades.
Indeed, Statistics New Zealand data showed price increases
were broad based - more than 80% of goods in the CPI basket saw
prices increases of above 2%, led by rising prices for
construction and food.
Some economists, including those at Kiwibank, believe the
price moves lower meant the RBNZ was near the end of its
tightening cycle.
"We have broken the back of the inflation beast. And we should see the last RBNZ rate hike in May," Kiwibank said. (Reporting by Lucy Craymer Editing by Chris Reese and Sam Holmes)
