Big rate cut due as inflation drops to 3.4pc

A big interest rate cut next week is now all but certain, as the latest Consumer Price Index confirms a big slump in inflation.

Annual inflation fell to 3.4 per cent in the December quarter, from the 18-year high of 5.1 per cent in the three months to September.

For just the December quarter, the Consumers Price Index (CPI) fell 0.5 per cent, Statistics New Zealand said this morning.

Transport prices fell 7.6 per cent in the quarter, while food prices were up 1.5 per cent. The rise in food prices was caused by more expensive meat, poultry and fish.

The 22.4 per cent fall in petrol prices in the December quarter was the largest single factor in the CPI decrease. Had petrol and diesel prices remained unchanged from the September quarter, the CPI would have increased 0.9 per cent, SNZ said.

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Posted: 20 Jan 2009

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