New Zealand consumer prices unexpectedly fell in the fourth quarter, giving the central bank scope to hold interest rates at a record-low until growth accelerates. The local currency dropped.
Consumer prices declined 0.3 percent from the third quarter, when they advanced 0.4 percent, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg News survey of 15 economists was for a 0.4 percent increase. None forecast a decline. Prices rose 1.8 percent in the year ended Dec. 31, the slowest annual pace since September 2010.
The first quarterly drop in prices since 2009 reflects an economy struggling to rebound from earthquakes in the past 16 months, even with a tourism boost from the Rugby World Cup. The inflation report sent the nation’s dollar falling from a 2 1/2- month high as investors increased bets central bank Governor Alan Bollard will keep the official cash rate at 2.5 percent until the second half of 2012.
“Domestic economic momentum is starting to soften,” said Philip Borkin, an economist at Goldman Sachs New Zealand Ltd. in Auckland. Today’s data give the Reserve Bank “some flexibility that if things deteriorate more than expected they have room to cut rates if need be,” he said.
New Zealand’s dollar weakened to 80.23 U.S. cents as of 11:47 a.m. in Wellington compared with 80.70 cents immediately before the report and 80.44 cents late yesterday in New York. It reached 80.82 cents yesterday, the highest since Nov. 1
