Banking News

NZ inflation at 5 year high

NZ inflation at 5 year high

(21 April 2017 – New Zealand) The New Zealand dollar jumped following a surprise announcement that the country’s inflation had rose at it fastest annual rate in five-and-a-half years. 

The consumer price index rose 1 percent in the three months to March 31 for an annual pace of 2.2 percent, driven by a combination of rising fuel prices, a tax on cigarettes and tobacco and the hot housing market. The rise marked the first time inflation hit the mid-point of the central bank's 1 percent-to-3 percent target band since September 2011

Excluding gasoline and cigarettes and tobacco, the CPI showed a 1.5 percent increase, Stats NZ said. The central bank is mandated with keeping inflation in a 1 percent to 3 percent band with a focus on the mid-point.

According to ANZ Bank New Zealand senior economist, the central bank will likely remain "cautious and watchful" given the one-off factors. Speaking to the NZ Herald, he noted that the fact the Reserve Bank's so-called "sectoral factor model," which estimates the common component of inflation in the CPI basket, the tradable basket, and the non-tradable basket, remained steady at 1.5 percent versus the prior quarter "shows that a lot of those surprises and movements were due to idiosyncratic factors rather than being a broad theme."

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