RBNZ Looking at Inflation to Keep Rates on Hold

The Reserve Bank and market economists are near agreement that inflation remained tame in the fourth quarter, keeping intact expectations that the official cash rate doesn’t need to rise from a record low until March.

The consumers price index fell 0.1 per cent in the final three months of 2013, for an annual rate of 1.5 per cent, according to a Reuters survey of 11 economists. The Reserve Bank forecast a 0.2 per cent decline in the quarter for an annual 1.4 per cent in its December monetary policy statement. The data is due for release on Jan. 21.

Fourth-quarter inflation is typically weak because of a seasonal decline in fruit and vegetable prices. The latest quarter was also characterised by a decline in prices of petrol and diesel, while the trade-weighted index near a record high has ensured tradables inflation has been non-existent. That means the Reserve Bank’s focus is on strength in non-tradable inflation, especially from a resurgent housing market.

NZ Herald

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