The central bank is mandated with keeping annual inflation between 1-and-3 per cent over the medium term, focusing on the mid-point. However, inflation has remained stubbornly weak and the central bank has signalled the official cash rate (OCR) is likely to remain at a record low 1.75 for some time to come given the lack of inflationary pressure. Today's data is unlikely to shake that view. The kiwi dollar was virtually unchanged at 67.70 US cents.
The biggest driver behind the quarterly lift was housing-related prices, up 0.9 per cent in the quarter and 3.1 per cent annually.
Actual rentals for housing rose 0.8 per cent in the quarter and were 2.5 per cent higher for the year. Property rates and related services were unchanged in the quarter for a 3.1 per cent annual increase. Household energy prices, which includes electricity, gas and solid fuels, rose a quarterly 1.6 per cent and an annual 2.8 per cent.
"New Zealanders are paying more to keep their homes running," Stats NZ prices senior manager Paul Pascoe said in a statement. "Rates, property maintenance services and home insurance are all higher than they were this time last year."
Dwelling insurance lifted 4 per cent on the quarter and 18 per cent on the year. The purchase of new housing lifted 3.9 per cent on the year and 1.1 per cent on the quarter.
Petrol prices rose 3.2 per cent in the quarter for an annual gain 10.5 per cent, also underpinning the lift in the CPI.
Transport group prices – which includes airfares – increased 0.2 per cent in the quarter and 2 per cent for the year. Higher petrol prices were countered by a 3.3 per cent quarterly fall in used car prices, Stats NZ said.
"It was cheaper to buy a used car this quarter as dealerships looked to move some stock, but that was offset by higher running costs," said Pascoe.
Food prices, meanwhile, lifted 0.8 per cent in the quarter, with fruit and vegetable prices up 3.1 per cent. Food prices rose 0.7 per cent on the year.
On the other side of the ledger, home entertainment prices fell, with cheaper audio-visual equipment and lower prices for subscriber television, Stats NZ said. Audio-visual equipment prices fell 15 per cent on the quarter while subscriber TV prices were down 7.2 per cent. Sky Network Television shares were unchanged at $2.60.
The tradables CPI, which includes goods and services that compete with international rivals, rose 0.3 per cent in the quarter and was up 0.1 per cent on the year. Non-tradables inflation, which focuses on domestic goods and services, rose a quarterly 0.4 per cent for a 2.5 per cent annual increase.
Phil Borkin, senior macro strategist at ANZ, said there was little in the release to suggest the Reserve Bank should move the OCR up or down.
"It is not the catalyst to push us in either direction really. It was kind of a middling result," Borkin said.
"All it suggests is that interest rates are not likely to move in hurry, in either direction, any time soon," Borkin said.
ASB economists said today's data reinforced the view that the central bank will be comfortable leaving the official cash rate (OCR) on hold.
"We continue to expect the Reserve Bank to leave the OCR on hold until November 2019," they said in a note.
At the June review, Reserve Bank Governor Adrian Orr said the OCR would remain at 1.75 per cent for now.
"However, we are well positioned to manage change in either direction – up or down – as necessary," he said then.
- BusinessDesk
