NZ inflation slows more than expected, rates seen on hold

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People shop for groceries in a supermarket in Auckland, New Zealand on April 14, 2017.

Inflation in New Zealand slowed by more than expected in the second quarter, sending the local dollar sharply lower and likely to reinforce the central bank’s resolve to keep interest rates steady at record lows for some time.

Consumer price inflation was flat in the second quarter, below the 0.2 percent expected by analysts in a Reuters poll, and down sharply from the 1.0 percent posted in the first quarter.

Statistics New Zealand said consumer prices grew 1.7 percent between April and June on an annual basis, down from 2.2 percent in the first quarter of this year and again under forecasts of 1.9 percent.

The numbers were lower than those forecast by the Reserve Bank of New Zealand and sent the local dollar down half a U.S. cent to $0.7269.

The RBNZ had forecast inflation of 0.3 percent on a quarterly basis and 2.1 percent on an annual basis for the second quarter of 2017.

The central bank has stuck to a neutral policy stance even as New Zealand’s has enjoyed some of the strongest growth among advanced economies and annual inflation hit a five-year high in the first quarter.