The New Zealand dollar rose to a two-and-a-half-month high after inflation climbed back into the Reserve Bank's target band, effectively scrapping the prospect of further rate cuts.
Government figures today showed the consumers price index rose 0.4 per cent in the December quarter for an annual increase of 1.3 per cent as the recovery in global oil prices pushed up local petrol costs and as the rampant housing market continues to drive rapid house price gains. The local currency climbed as high as 73.12 US cents, the highest since November 9, and recently traded at 73.07 cents from 72.70 cents immediately before the release, while two-year swaps rose 4 basis points to 2.42 per cent.
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Economists polled by BusinessDesk had been picking a quarterly pace of 0.2 per cent for an annual increase of 1.2 per cent, while the RBNZ's own forecast was for consumer prices to rise 0.2 per cent in the December quarter for an annual increase of 1.1 per cent. Governor Graeme Wheeler cut the official cash rate a quarter-point to a record-low 1.75 per cent in November, and projected the benchmark rate to stay unchanged through the bank's forecast horizon until the end of 2019.