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NZ on the cusp of deflation

NZ on the cusp of deflation

(25 January 2016 – New Zealand) New Zealand was hovering just above deflation according to official figures released last week, indicating a lower-than-expected inflation rate of 0.1 percent over the last year.

The low figure – New Zealand’s smallest annual movement since a 0.5 percent fall in the year to September 1999 -- raised the prospect that the central bank, which had forecast 0.4 percent annual inflation, would further reduce interest rates.

The figures, released by Statistics New Zealand, sent the New Zealand dollar down by about half a cent to US$0.6414.

Inflation for the last quarter fell 0.5 percent while market expectations were for a 0.2 percent decline.

The Reserve Bank of New Zealand cut the official cash rate four times last year to a record low of 2.5 percent, with further cuts expected.

Traditionally, New Zealand's inflation rate falls in the December quarter due to lower vegetable prices, however falling petrol prices caused it to accelerate.

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