Soaring petrol stokes inflation rate
Statistics New Zealand said today a 20.5 per cent jump in petrol prices made the biggest individual contribution to the annual consumer price index (CPI) growth of 3.4 per cent.
Government statistician Geoff Bascand said if petrol prices had remained constant from the March 2007 quarter, the CPI would have risen just 2.5 percent.
March quarter CPI rose 0.7 percent largely due to a 1.8 per cent rise in food prices. The main contribution came from a 3.6 per cent rise in grocery food prices such as cheese, bread, and butter.
The Reserve Bank is tasked with holding inflation between 1 and 3 per cent on average over the medium-term.
%26quot;The Reserve Bank will see the result as reinforcing its view that it is unlikely to soon cut interest rates, notwithstanding the weakening economy,%26quot; ASB chief economist Nick Tuffley said.
%26quot;We expect inflation to persist above the Reserve Bank%26#39;s 1 per cent to 3 per cent target band over the course of the year. The things driving inflation up are all items that are hard to avoid spending money on,%26quot; Tuffley added.
The official cash rate is currently 8.25 per cent. The next Reserve Bank OCR decision is due on Thursday, April 24.
The 3.4 per cent rise was in line with Reserve Bank expectations but slightly below economists%26#39; forecasts for a rise of about 3.5 per cent. The March year CPI rise follows a 3.2 per cent increase over the 2007 calendar year.
Westpac chief economist Brendan O%26#39;Donovan said inflation pressures would not abate anytime soon despite economic growth stalling.
%26quot;The economy is operating with scant spare capacity and immense cost pressures,%26quot; O%26#39;Donovan said. %26quot;This is not an environment in which to cut the OCR early.%26quot;
The CPI is a measure of the price change of goods and services purchased by private New Zealand households. The CPI is produced quarterly from prices gathered in a range of surveys at 15 urban areas.Separately, Statistics New Zealand said food prices rose 0.7 percent in March, largely due to a 3.1 per cent rise in fruit and vegetable prices. This in turn was accentuated by a massive 79.9 per cent rise in tomato prices.
