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Few surprises expected in CPI data

NZ NewswireNZ Newswire 17/07/2016

Inflation data due on Monday won't be high but the details in the report may worry the Reserve Bank as it ponders its next interest rate decision. © Bloomberg Inflation data due on Monday won't be high but the details in the report may worry the Reserve Bank as it ponders its next interest rate decision. The numbers will be low in the second quarter inflation report but will add to a confused economic picture.

The consumer price index is expected to rise 0.5 per cent in the June quarter. The data is due at 10.45am on Monday.

The annual figure is also expected to be 0.5 per cent, which will be the highest in 18 months, although still the seventh consecutive quarter below 1 per cent, ANZ economists say.

The devil may be in the detail, with evidence expected of domestic inflation lifting of lows.

Food and petrol prices are expected to rise as will construction prices, rents and home heating prices.

But prices for furniture and household appliances are falling.

ANZ expects the data will "cloud" the interest rate decision the Reserve Bank of New Zealand will make in August.

"The RBNZ acknowledges that price and wage-setting behaviour is more backward-looking than previously thought, therefore a low actual CPI outturn matters," ANZ economists say.

ASB economists say the RBNZ's decision in August is a line-ball call.

"We think whether or not the RBNZ decides to cut the official cash rate will ultimately come down to whether the RBNZ is more concerned about house prices, and financial stability, or the impact on inflation from the elevated level of the NZ dollar."

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