(Corrects to third quarter, not second quarter, in first paragraph)
By Lucy Craymer
WELLINGTON (Reuters) -New Zealand’s consumer inflation hit a two-year low in the third quarter but remained above the central bank’s target of 1% to 3% as prices of everything from food to housing rise.
Consumer prices rose 5.6% year-on-year in the third quarter, slower than the 6.0% increase in the second quarter, Statistics New Zealand said in a statement on Tuesday.
The consumer price index (CPI) rose 1.8% quarter-on-quarter, faster than the 1.1% rise in the second quarter. The data was slightly lower than economists’ expectations in a Reuters poll for a 2.0% rise for the quarter and a 5.9% annual rise.
Inflation is a significant challenge for the Reserve Bank of New Zealand and it has responded by raising interest rates to 5.5% from a record low 0.25% in October 2021. The bank has said it now believes that rate increases are having the desired impact on dampening inflation, although the cash rate will have to remain at this restrictive level for some time to ensure inflation returns to the target range.
Two-year swap rates fell 7 basis points to 5.63% as the market pared the chance of a hike in November to 20%, from 33% ahead of the data. The New Zealand dollar slipped 0.3% to $0.5910.
The main drivers of annual inflation were rising prices for construction and rents while food was the biggest contributor to quarterly inflation, Statistics New Zealand said in a statement.
“Prices are still increasing, but are increasing at rates lower than we have seen in the previous few quarters,” said Nicola Growden, the prices senior manager at Statistics New Zealand.
Statistics New Zealand added that non-tradeable inflation rose 6.3% on year.
(Editing by Rod Nickel)