NZ 1st-qtr inflation accelerated less than expected

The Consumers Price Index rose 0.4% in the three months ended March 31, for an annual pace of 2%, according to Statistics New Zealand. Economists had expected a 0.6% gain, based on a Reuters survey though the number has printed closer to Bollard's estimate of 0.3%. CPI was -0/2% in the fourth quarter of 2009.

The inflation figures may have a bearing on Bollard's review of monetary policy next week, when he is expected to keep the official cash rate at a record low 2.5% while providing further hints to the timing of any eventual hike. Some economists are now betting he will wait until the third quarter rather than move mid-year as he has been indicating.

Non-tradable inflation was 0.5% in the first quarter, milder than the 0.6% pace the central bank had expected, which may provide some comfort over price increases in the domestic economy. Tradable inflation was just 0.1%.

"The slightly softer non-tradable result gives the RBNZ a bit of inflation breathing space in the near-term," said Christina Leung, economist at ASB. "There is now a less compelling case for a June OCR hike."