A businessman walks past a shop having a sale on Lambton Quay in Wellington Sept 23, 2009. REUTERS/Anthony Phelps/File photo
WELLINGTON -New Zealand’s consumer inflation fell to its lowest level in two years but remains above the central bank’s target of 1 percent to 3 percent as prices of everything from food to housing rise.
Annual inflation rose 5.6 percent in the third quarter, slower than the 6 percent increase in the second quarter, Statistics New Zealand said in a statement on Tuesday.
The consumer price index (CPI) rose 1.8 percent quarter-on-quarter, faster than the 1.1 percent rise in the second quarter. The data was slightly lower than economists’ expectations in a Reuters poll for a 2 percent rise for the quarter and a 5.9 percent annual rise.
READ: NZ central bank sees cash rate on hold until 2025
Inflation is a significant challenge for the Reserve Bank of New Zealand and it has responded by raising interest rates to 5.5 percent from a record low 0.25 percent 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.
READ: NZ central bank holds rates, signals higher hurdle to further hikes
Two-year swap rates fell 7 basis points to 5.63 percent as the market pared the chance of a hike in November to 20 percent, from 33 percent ahead of the data. The New Zealand dollar slipped 0.3 percent 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 percent on year.