New Zealand inflation data raises rate rise chances
Tuesday, 17 July 2007
WELLINGTON, July 16 (AFP): New Zealand posted a higher than expected spike in prices for the June quarter, raising the likelihood of another rise in already very high interest rates, economists said today.
The consumer price index (CPI) rose 1.0 per cent in the three months to June, above expectations of both the central bank and economists. In the year to June, inflation came in at 2.0 per cent.
Of most concern was non-tradables inflation, which reflects the domestic economy and excludes exports and volatile imports such as oil.
Reserve Bank of New Zealand (RBNZ) governor Alan Bollard has focussed on growing pressures in the non-tradables sector in a recent series of rate rises.
The official interest rate now stands at 8.0 per cent, one of the highest in the developed world, with the next review due on July 26.
Non-tradeables inflation rose 1.1 per cent from the March quarter or 4.1 per cent from June last year, due in large part to a continuing housing market boom.
"Non-tradables inflation is accelerating in 2007, rather than cooling," ASB economist Daniel Wills said.
"Coming on the back of the strong retail sales figures, the sharper than expected CPI is likely to be the last straw on the camel's back for the (Reserve Bank of New Zealand)," ASB Bank economist Daniel Wills said.
The bank's target range for inflation is one to three per cent, and Deutsche Bank's Darren Gibbs estimated headline inflation would reach 3.2 per cent by the end of the year.
The consumer price index (CPI) rose 1.0 per cent in the three months to June, above expectations of both the central bank and economists. In the year to June, inflation came in at 2.0 per cent.
Of most concern was non-tradables inflation, which reflects the domestic economy and excludes exports and volatile imports such as oil.
Reserve Bank of New Zealand (RBNZ) governor Alan Bollard has focussed on growing pressures in the non-tradables sector in a recent series of rate rises.
The official interest rate now stands at 8.0 per cent, one of the highest in the developed world, with the next review due on July 26.
Non-tradeables inflation rose 1.1 per cent from the March quarter or 4.1 per cent from June last year, due in large part to a continuing housing market boom.
"Non-tradables inflation is accelerating in 2007, rather than cooling," ASB economist Daniel Wills said.
"Coming on the back of the strong retail sales figures, the sharper than expected CPI is likely to be the last straw on the camel's back for the (Reserve Bank of New Zealand)," ASB Bank economist Daniel Wills said.
The bank's target range for inflation is one to three per cent, and Deutsche Bank's Darren Gibbs estimated headline inflation would reach 3.2 per cent by the end of the year.