WELLINGTON (Reuters) - New Zealand's inflation accelerated at a slightly faster than expected pace in the third quarter, driven by higher household costs, but it did little to change the view that interest rates would be cut further this year to bolster the economy.
Statistics New Zealand said on Wednesday that consumer prices rose 0.7% in the September quarter and 1.5% from the same period a year earlier, faster than the Reserve Bank of New Zealand's (RBNZ) forecasts and the consensus of economists polled by Reuters.
Consumer prices rose 0.6% in the previous three month period and 1.7% on year. The Reserve Bank of New Zealand (RBNZ) had forecast a 0.5% quarterly and 1.3% year-on-year rate of inflation.
The annual increase in inflation was driven by higher prices for rents, cigarettes and tobacco, the agency said in a statement. The quarterly CPI increase was due to price rises for local authority rates and payments, vegetables, and meat and poultry, it said.
The New Zealand dollar rose 0.25% to $0.6308 after the inflation data as dovish traders eased some of their bets.
However, the data did little to change the market view that RBNZ would cut rates again this year to boost an economy facing headwinds from global uncertainty and a slowdown in activity and business confidence.
Kiwibank Chief Economist Jarrod Kerr said in a note that while today's data was above expectation, RBNZ still needs to do more and he expects a rate cut in November.
The central bank kept the official cash rate (OCR) at a record low of 1.0% last month, after stunning markets with a steep 50 basis-point rate cut in August.
RBNZ has said the reduction in the OCR this year was needed to ensure inflation increases to the 2% mid-point of its target 1-3% range, and employment remains around its maximum sustainable level.
"Today's data just reduces the case that the RBNZ needs to put all 50 bps of stimulus through in November as market pricing has recently suggested was a possibility – albeit a slim one," said Kerr.
Markets are now pricing an 87% chance of a rate cut by 25 basis points at RBNZ's next meeting on Nov. 13.