21 Jan 2013

RBNZ reluctant to trim rates - economist

8:35 am on 21 January 2013

An economists says the Reserve Bank will be reluctant to cut interest rates, even though the latest inflation figures show it is below the central bank's target range.

Official figures show the consumer price index in the final three months of last year unexpectedly fell 0.2% , whereas the market, and even the Reserve Bank had been picking a rise.

This brings annual inflation to 0.9%, which is below the central bank's target range of 1 - 3%,

Employers and Manufacturers Assocation chief executive Kim Campbell says with inflation this low, interest rates need to be cut.

But ASB senior economist Jane Turner say the Reserve Bank is unlikely to respond to such calls.

Ms Turner says while inflation is muted now, pressures are building.

ASB expects the first interest rate hike will not be until at least March 2014.