Inflation slows but experts split on interest rate rise

New Zealand's annual inflation rate probably slowed in the September quarter from a five-year high as petrol prices fell, but the result may not be enough to prevent the central bank raising interest rates again next week.

Consumer prices probably rose 3.6 per cent from a year earlier, slowing from 4 per cent in the previous three months, according to the median forecast of 13 economists surveyed by Bloomberg News.

The inflation figures are due to be released on Wednesday, the day before Reserve Bank Governor Alan Bollard is to decide on interest rates.

Bollard, who must keep annual price increases between 1 and 3 per cent, said last month that he was "less confident" the benchmark interest rate would not need to rise from a record high because inflation was not abating fast enough.

The dollar has surged in the past three months as investors increased bets of a rate increase next week.

"Inflation is undeniably headed down. The key question is how fast," said Daniel Wills, economist at ASB Bank. "The inflation outlook may not be as benign as the headline suggests."

Wills expects Bollard will raise the official cash rate a quarter-point to 7.5 per cent. Seven of 15 economists surveyed by Bloomberg News forecast a rate increase. Eight predicted no change.

The dollar rose 6.3 per cent in the past three months, the best-performing major currency against the US dollar, amid reports showing a record-low jobless rate and a buoyant housing market, which may fan spending and inflation.

House sales hit a four-month high in September. The jobless rate was 3.6 per cent in the March quarter.

- BLOOMBERG