New Zealand inflation slowdown adds to scope for RBNZ rate cut

[WELLINGTON] New Zealand annual inflation slowed in the fourth quarter to its weakest since 1999, giving central bank Governor Graeme Wheeler greater scope to cut interest rates this year. The currency slumped.

Consumers price index rose 0.1 per cent in the fourth quarter from a year earlier. The gain was less than the 0.3 per cent median forecast of 13 economists. Prices fell 0.5 per cent from the third quarter, compared with a median forecast of a 0.2 per cent decline.

Benign inflation means there is little impediment to Wheeler cutting the official cash rate further this year if needed after he reduced it four times to a record-low 2.5 per cent last year.

Traders have increased bets on lower borrowing costs as falling oil prices and anxiety over the global growth outlook threaten to delay the return of the prices gauge to the middle of Wheeler's 1-3 per cent target range.

The New Zealand dollar fell more than half a US cent. It bought 64.17 cents at 10.56am in Wellington from 64.70 cents immediately before the release.

BLOOMBERG