New Zealand consumer prices rose less than economists forecast last quarter as a strengthening currency makes imports cheaper, adding to signs a period of record-low interest rates will be prolonged. The kiwi fell.
Consumer prices increased 0.4 percent from the fourth quarter, when they fell 0.2 percent, Statistics New Zealand said in Wellington today. That’s less than the 0.5 percent median estimate in a Bloomberg News survey of 14 economists. Prices gained 0.9 percent from a year earlier, matching estimates.
Annual inflation was slower than the central bank’s 1 percent to 3 percent target for the third straight quarter, matching the central bank’s forecasts. Reserve Bank Governor Graeme Wheeler last month said he expected to leave borrowing costs unchanged at 2.5 percent this year because of the effects of a drought and the strong currency on growth.
“The continued deflationary impact of the elevated New Zealand dollar suggests inflation will remain subdued over the first half of 2013,” Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland, said in an April 15 note. He forecasts no change in rates until March 2014.
New Zealand’s dollar has gained 2.5 percent this year, the best-performing Group of 10 currency. It fell to 84.67 U.S. cents as of 10:47 a.m. in Wellington from 84.82 cents immediately before the report.
Nine of 15 economists surveyed by Bloomberg News this week expect no change in rates this year. Six see a rate rise by Dec. 31. None forecast a rate cut.
Wheeler started in his role in late September after signing an agreement with Finance Minister Bill English requiring him to keep annual inflation in a 1 percent to 3 percent range, with a focus on the 2 percent midpoint.
The central bank on March 14 estimated prices rose 0.9 percent in the first quarter from a year earlier. It projected annual inflation would pick up gradually in the next two years, and won’t reach 2 percent until the second half of 2015.
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