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Inflation slows in third quarter

NZN 17/10/2016 Jonathan Underhill

New Zealand inflation slowed in the third quarter as a drop in transport-related prices such as vehicle relicensing fees offset higher vegetable and housing-related prices.

The consumers price index rose 0.2 per cent in the three months ended September 30 for an annual increase which was also 0.2 per cent, Statistics New Zealand said.

Economists had expected no change in the quarter for an annual 0.1 per cent gain, while the Reserve Bank had forecast 0.1 per cent for the quarter and 0.2 per cent for the year.

The New Zealand dollar gained, recently trading at 71.73 US cents, from 71.32 cents ahead of the data release.

Annual inflation has now held below the central bank's 1 per cent-to-3 per cent target range for eight consecutive quarters, although based on its August projections it sees the rate climbing to an annual 1 per cent in the final three months of 2016.

Traders have put odds of 84 per cent on a cut to the official cash rate of 25 basis points on November 10, taking the bank's benchmark rate to a record low 1.75 per cent.

Housing and household utility prices provided the biggest contribution to the quarterly CPI, rising 1.1 per cent, driven by a 2 per cent gain in new housing prices, excluding land, and a 3 per cent gain in local authority rates. Vegetable prices jumped 16 per cent, or a 0.5 per cent gain seasonally adjusted.

Transport prices were the biggest offset, falling 3 per cent in the quarter.

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