A nudge to quarterly inflation is expected by economists
to remind the Reserve Bank of plans to begin raising the
interest-driving official cash rate early next year.
Economists are predicting a near doubling of the annual
inflation rate, to within a band of about 1.3%-1.4%.
At present, annual inflation, measured by the consumer price
index (CPI) is at 0.7% and at the bottom end of the Reserve
Bank's 1%-3% target, with CPI data due to be released on
Wednesday by Statistics New Zealand.
ASB economist Jane Turner expects the third-quarter CPI to
show increases of 1% from the previous quarter and 1.4%,
compared with a year ago, with the annual CPI expected to
increase from the 0.7% to 1.7%.
''A seasonal increase in fruit and vegetable prices, lift in
petrol prices and council rate increases are behind the
third-quarter lift,'' she said.
Separate data released by Statistics New Zealand showed food
prices for September were up 1.2% on a year earlier, but
otherwise unchanged from August.
Vegetable prices fell 7.4% during September, with tomatoes
and lettuce coming into season, but that was offset by a 6.4%
hike in the price of fresh milk, its biggest gain since July
Food prices account for almost 20% of the CPI, which showed
an annual inflation rate of 0.7% in the June quarter, the
slowest since 1999.
''Annual inflation is likely to have turned a corner in the
third quarter, paving the way for the Reserve Bank to hike
rates from early 2014,'' Ms Turner said.
She said a CPI result on the high side of the Reserve Bank's
forecast would reinforce the likelihood of an OCR increase
next, albeit the bank had some leeway given the New Zealand
dollar was tracking ahead of expectations.
Westpac senior economist Michael Gordon said the annual
inflation rate was set to rise back within the Reserve Bank's
1%-3% target band for the first time in more than a year.
That would give the bank more confidence in its message that
interest rates will need to rise from next year, and that its
monetary policy was on the right track.
He predicted the CPI would rise 0.9% for the September
quarter, which would lift the annual inflation rate from 0.7%
However, the expected near-doubling of the inflation rate in
one go probably overstated the degree to which inflation
pressure was picking up, he said.
''With the economy still operating with some slack, and the
New Zealand dollar remaining high, we don't expect annual
inflation to be back at the Reserve Bank's target midpoint of
2% until the end of next year,'' Mr Gordon said.
Ms Turner said underlying inflation pressures were beginning
to pick up, albeit from low levels. ''Construction cost
inflation should continue to lift along with the increase in
construction activity in Canterbury and Auckland,'' she said.
Mr Gordon said the June quarter CPI had revealed a ''sharp
jump'' in new house prices nationwide, but he was waiting to
see evidence of this happening consistently outside the
''With house prices accelerating and construction activity
picking up, we'll be watching for further evidence of rising
housing-related costs; new house prices, rents, maintenance
and selling fees,'' he said.