New Zealand Inflation Surprises on Downside

New Zealand's inflation rate rose just 0.3 percent quarter-on-quarter in January-March but the lower than expected figure is unlikely to stop the central bank raising interest rates again, analysts said Wednesday.

Statistics New Zealand said the rise, largely driven by an increase in tobacco tax and surging house prices, put the annual inflation rate at 1.5 percent, well within the central bank's 1.0-3.0 target.

But TD Securities head of Asia-Pacific research Annette Beacher said inflationary pressures were building in the economy and the Reserve Bank of New Zealand would raise rates again to head them off.

She said the bank made its intentions clear last month, when New Zealand became the first advanced economy to raise interest rates since 2012, lifting the official cash rate by 0.25 points to 2.75 percent.

Beacher said one set of benign inflation figures was unlikely to derail the process and rates were set to go up 0.25 points again at the bank's next monetary policy meeting on April 24.

"We doubt this soft print stands in the way of the RBNZ's 'big picture' decision to shift monetary policy towards a more neutral stance after years of above-trend GDP growth and inflation approaching mid-target," she said.

Beacher said the bank intended to lift rates to about 4.5 percent, a level it considers neutral, "as soon as possible".