New Zealand's consumer price index (CPI) was much stronger than expected in the fourth quarter, as accommodation and housing prices jumped, according to data released by Statistics New Zealand on Friday.
CPI rose 0.5% in the quarter ending December from 0.7% in the previous period.
Annual inflation was 1.4% unchanged from the previous quarter. Economists polled by Reuters had forecast CPI to stay flat in the quarter, with an annual rise of 1.4%.
In its monetary policy statement in November, the Reserve Bank of New Zealand (RBNZ) forecast a 0.2% rise in quarterly CPI and an annual rate of 1.1%.
Domestic accommodation services were the top contributor to the CPI increase in the quarter, as the easing of the lockdown and restrictions on overseas travel boosted domestic tourism.
COVID-19 travel restrictions have meant that Kiwis who planned to go overseas are now travelling more domestically, or looking to upgrade their cars, furniture, and electronics, Statistics NZ said.
“All these items had price rises in the December quarter...,” Statistic NZ prices senior manager Aaron Beck said in a statement.
The cost of building a new house also rose 1.3% in the December quarter, the biggest quarterly rise in more than two years. Annually, purchase of new housing increased 3.3%.
Historically low interest rates, along with other monetary and fiscal stimulus to support a pandemic-hit economy have fired up New Zealand's housing market which is at historic highs.
The higher than expected inflation meant it was unlikely that RBNZ needed to do more to meet its targets.
"The rampant advances in the housing market have surely taken a negative cash rate off the table. We have changed our call on the RBNZ. We now expect the OCR to be left unchanged, well into 2022," said Kiwibank Chief Economist Jarrod Kerr.
(Reporting by Praveen Menon; Editing by Marguerita Choy)
