15 Jul 2008

Inflation now 4%

1:26 pm on 15 July 2008

Inflation has risen sharply in the three months to June, driven by higher petrol prices.

Official figures show the Consumers Price Index rose 1.6% in the period.

Statistics New Zealand says petrol prices rose 13%. Higher food prices were also prominent.

Households and companies also had to cope with stronger electricity prices as drought affected production.

On an annual basis, inflation is now at 4%. That's outside the Reserve Bank's target band of 1% - 3%.

However, most economists expect the Bank will start lowering the Official Cash Rate from September on mounting evidence the economy is in recession.

Goldman Sachs JBWere economist Shamubeel Eaqub says the situation is volatile - which will make it difficult for the Reserve Bank to know when to lower interest rates.

The OCR is currently 8.25%. It was set in July last year.

Jobless numbers

Meanwhile, unemployment continues to decline.

Labour market reports issued by the Department of Labour, show unemployment is lower than 5%, in all 12 regions surveyed.

But the report shows that several districts, mainly in the eastern Bay of Plenty, still have relatively high rates of unemployment.