Inflation unlikely to boost interest rates

New Zealand's inflation rate probably went over the Reserve Bank's 1 to 3 per cent target range in calendar 2005.

But the breach is not expected to result in an official interest rate rise because the economy is slowing already, economists said.

Economists are expecting Wednesday's consumer price index to show an annual rate of around 3.3 per cent for the December year.

That would be just short of the 3.4 per cent recorded for the 12 months to September, with high fuel prices again expected to loom large.

Market expectations are for the current official cash rate of 7.25 per cent to represent its peak, and for the Reserve Bank's next move to be a cut some time this year.

UBS New Zealand economist Robin Clements said the CPI might turn out to be a little tamer than the Reserve Bank's December monetary policy statement forecast of 3.4per cent.

"It will add to the picture, in my view, that they will not need to do any more tightening," Clements said.

Westpac expects the CPI to rise by 0.8 per cent, quarter on quarter, and by 3.3 per cent in the December year.

Deutsche Bank NZ said the CPI, together with next week's QSBO Business Survey,November retail sales report and the December REINZ housing report, will form the final pieces of key domestic information to be considered by the Reserve Bank before its official cash rate review on January 26.

- HERALD ON SUNDAY