The consumer price index contracted 0.2% over the December quarter, below market and Reserve Bank expectations.
The annual rate of inflation edged higher to 0.9% from 0.8%, but remains below the Reserve Bank’s medium-term inflation target band of 1%-3%.
ASB economist Jane Turner said the bank expected inflation to be quite contained in the near future.
As a result, the bank had shifted its forecast for the first OCR increase from December 2013 to March 2014.
She said an earlier increase was possible if the heat in parts of the housing market and the acceleration of credit growth became a concern to the Reserve Bank.
“There is the small, but growing, possibility the RBNZ turns to its macro-prudential toolkit first if expected inflation pressures remain muted yet housing/credit growth strengthen in such a low interest rate environment.”
The rate of mortgage approvals reached more than 8000 per week in December for the first time since 2009.
Turner’s colleague, Christina Leung, said that was the kind of growth in credit that the Reserve Bank would be wary of but she did not think it was at a level to alarm governor Graeme Wheeler yet.
“It will be interesting to see how it pans out. It’s certainly one to watch.”
