By Lucy Craymer
WELLINGTON (Reuters) -New Zealand’s consumer inflation was in line with expectations in the fourth quarter and while it continues to track towards the central bank’s target range of 1% to 3% domestic inflation remains high.
Annual inflation was 4.7% in the fourth quarter, slower than the 5.6% in the third quarter, Statistics New Zealand said in a statement on Wednesday. It is now at its lowest level since the middle of 2021.
The consumer price index (CPI) rose 0.5% quarter-on-quarter, slower than the 1.8% rise in the third quarter. The data was in line with economists’ expectations in a Reuters poll and there was no market reaction.
The main drivers of the annual inflation were food, alcohol and tobacco and housing and household utilities, Statistics New Zealand said in a statement.
Economists noted that non-tradeable inflation, at 5.9%, remained too high and could pose some concern for the central bank.
“The divergence between the domestic and imported components of inflation helps to illustrate the big concerns that the RBNZ is trying to balance,” Westpac senior economist Satish Ranchhod said.
He added the data left a picture of “lower inflation” but not “low inflation” with domestic inflation still higher than the central bank is comfortable with.
“Rate cuts won’t be on the table in the near term,” Ranchhod said.
The Reserve Bank of New Zealand (RBNZ) raised its policy interest rate to 5.5% in the middle of 2023 from a record low of 0.25% in October 2021 to try to dampen inflationary pressures.
Rates have been on hold as the central bank waits for higher rates to work through the economy and pull inflation down. The central bank had forecast in November that fourth-quarter inflation would be 5.0% and that the inflation rate would return to the target band by the second half of 2024.
(Reporting by Lucy Craymer in WellingtonEditing by Daniel Wallis and Matthew Lewis)