NZ inflation rises by most in a decade firming rate hike views; dollar jumps (updated)

CPI SA

16/07/2021 24:31

(Adds analyst comment, details on comparison period,
background)
    By Praveen Menon
    WELLINGTON, July 16 (Reuters) - New Zealand's consumer price
index (CPI) beat expectations in the second quarter soaring by
its highest in about a decade, sending the dollar higher and
firming the market view that the central bank may tighten
monetary policy as early as August. 
    CPI rose 1.3% in the quarter ending June from 0.8% in the
first quarter, according to data released by Statistics New
Zealand on Friday, taking annual inflation to 3.3%, the highest 
it has increased since June 2011 and past the Reserve Bank of
New Zealand's (RBNZ) target inflation band of 1%-3%.
    The increase was driven by higher prices for new housing and
petrol, Statistics New Zealand said in a statement, but part of
it was attributable to the fact that it is measured against the
June 2020 quarter, a period impacted by the COVID-19 lockdown
where some prices fell.
    Economists polled by Reuters had forecast CPI to rise 0.8%
for the quarter, with an annual rise of 2.8%.
    The inflation figures easily outpaced the RBNZ's forecast in
May of a 0.6% rise in quarterly CPI and an annual rate of 2.6%,
and firmed up views that a hiking cycle may start soon.
    "We now expect the RBNZ to lift the cash rate in August, in
what will be the first of at least three hikes from here,"
Kiwibank Chief Economist Jarrod Kerr said.
    "An earlier lift-off from the RBNZ will (hopefully) mean
less work will need to be done to restrain the economy in the
future," he said.
    The New Zealand Dollar  NZD=D4  jumped 0.3% on the inflation
figures touching $0.7003.
    RBNZ ceased its pandemic-induced quantitative easing
programme earlier this week, after recent data showed a rebound
in business confidence but sharply rising inflationary pressures
and a tight labour market.  urn:newsml:reuters.com:*:nL4N2OP0YC
    "We had already expected the bank to hike rates at its next
meeting in August and the strength of today’s data only bolsters
our conviction in that forecast," Ben Udy from Capital
Economists said. 

 (Reporting by Praveen Menon; Editing by Stephen Coates)
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