20 Jan 2014

Inflation likely contracted in December quarter

11:36 am on 20 January 2014

The rate of inflation likely fell 0.1% in the December quarter, taking the annual rate to 1.5%.

That's the median forecast from economists for the figures to be released on Tuesday and compares with the Reserve Bank's forecast of a 0.2% decline in the quarter.

ASB Bank chief economist Nick Tuffley says the strong New Zealand dollar, seasonally deflated food prices and lower petrol prices should all contribute to the decline he's expecting.

He says if inflation from 1.3% - 1.6% will not be that significant, but the Reserve Bank will have to pay more attention if there is a strong figure that could suggest underlying inflation pressures.

Mr Tuffley says a slightly weaker than expected outcome is not likely to stop the Reserve Bank from lifting the cash rate in March, for example, because it expects inflation to creep up steadily over the next couple of years.