Accelerating New Zealand inflation is firming expectations for an early rate hike next year, with consumer prices rising at the fastest quarterly pace and ended a year-long period where the annual pace was slower than the Reserve Bank's target.
Two-year swap rates rose as high as 3.59 per cent, the highest level since August 2011, and were recently up 3.3 basis points to 3.57 per cent.
Government figures released this morning showed the consumers price index increased 0.9 per cent in the three months ended September 30, its fastest pace since June 2011, and accelerating from a 0.2 per cent increase in June.
The annual pace of inflation accelerated to 1.4 per cent, back within the central bank's target band of between 1 per cent and 3 per cent, from 0.7 per cent in June, the slowest pace in 14 years, according to Statistics New Zealand.
"It now looks more clear the last quarter print was the bottom of the cycle," said Imre Speizer, market strategist at Westpac Bank in Auckland. "It keeps the pressure on the Reserve Bank to hike by March."