Inflation in New Zealand stalled unexpectedly in the second quarter, a sign that falling oil prices were hampering cost pressures throughout the economy.
The consumer price index (CPI) was zero in the second quarter, following a 1% increase in the March quarter, Statistics New Zealand reported Tuesday.
Food prices rose 0.7% during the quarter, while household utilities costs climbed 0.8%. Transport prices were down 1.3%.
Annual inflation rose 1.7%, following a 2.2% increase the previous quarter that was higher than expected.
Analysts in a median estimate called for a quarterly advance of 0.2% and an annual increase of 1.9%.
Banks dialed back their expectations of annual inflation following the latest drop in oil prices. BNZ and Westpac forecast annual CPI to drop to 1.8%.
Easing inflation is a concern for policymakers, who have slashed interest rates to record lows in support of broad macroeconomic objectives. Chief among them is promoting a stable inflation rate somewhere in the middle of 1-3%.
At the same time, tame inflationary pressures are a welcome sign for homeowners worried about mortgage rates and a broad cool down in economic growth. Though New Zealand’s economic prospects remain among the best in the industrialized world, GDP growth has been lackluster in recent quarters.
The economy gained 0.5% in the first quarter, which was below the consensus forecast calling for a 0.7% increase. Dairy export prices helped Wellington post its best terms of trade in 44 years during the quarter.