Headline Consumer Price Index inflation was 0.2% in the three months ended September, which was above expectations of zero and above the Reserve Bank's forecasts of 0.1%.
However, annual inflation fell to 0.2% from 0.4% in June. The Reserve Bank has a midpoint target inflation rate of 2% but inflation is not expected to reach that point until mid-2018.
ANZ senior economist Philip Borkin said low inflation would not stand in the way of the central bank cutting the official cash rate next month. The OCR is now 2%.
''The more interesting question is whether we see additional easing beyond that, particularly in the context of the strong domestic economy and rising capacity strains.''
The case was building for the OCR to not fall further, but that would be frustrating as the game of chicken between the OCR, inflation and the New Zealand dollar was set to continue, he said.
Looking at the figures, Mr Borkin said one-offs contributed to the weakness in inflation, as expected. Private transport services fell 28% on the back of lower motor vehicle relicensing fees.
Tradeable prices were flat in the quarter to be -2.1% on an annual basis. Non-tradeable prices rose a modest 0.3% in the quarter to reach 2.1% annually.
Excluding the impact of central and local government changes, annual non-tradeable inflation lifted to 2.7% annually, which was the highest since March 2014 and consistent with growing capacity pressures in the economy, he said.
Petrol prices partially reversed their second quarter rise, falling 1.7% in September. Food prices rose 0.4%.
''Interestingly, there was less evidence of retail price weakness than we expected. Some components surprised meaningfully on the upside.''
Labour finance spokesman Grant Robertson said low inflation piled pressure on the Reserve Bank and the Government.
Low inflation would be welcomed by many but the data painted a troubling picture of the New Zealand economy.
The CPI only counted new builds in terms of housing costs. Those rose 2% annually and 6.2% for the quarter. Factoring in rises in rents and the spiralling cost of purchasing existing homes, the cost of housing for most New Zealanders was rising far in excess of inflation, he said.
''This is a huge problem for most New Zealanders who have seen their wages barely rise in recent years,'' he said.
''These figures will also pile pressure on the Reserve Bank to reduce interest rates. The Reserve Bank has failed to hit its inflation target since 2011 and has kept interest rates high because of National's inability to deal with the housing crisis.''
