New Zealand inflation at 13-year low

New Zealand's inflation slipped to a 13-year low of 0.8 percent in the year to September, official data showed Tuesday, taking it below the central bank's 1.0-3.0 percent target band. Statistics New Zealand said inflation rose 0.3 percent in the September quarter, lower than market expectations of a 0.5 percent rise, due to falls in domestic air fares, petrol and telecommunications services. It said inflation for the year to September was 0.8 percent, the smallest annual increase since December 1999. However, with inflation set to rise over the medium term, fuelled by construction in earthquake-hit Christchurch, economists said the Reserve Bank of New Zealand (RBNZ) would maintain a hands-off approach to interest rates. "It remains prudent to keep the OCR (official cash rate) low, with a long wait on the sidelines for the RBNZ," ANZ Bank said in a note to clients. First NZ Capital said the low inflation figure, coupled with recent signs of muted economic activity in New Zealand economy, meant rates could remain on hold until 2014. "The prospect of unchanged rates for the whole of 2013 has now clearly increased," it said in a note. The cash rate has remained at a record low of 2.5 percent since March last year, when the Reserve Bank lowered it to cushion the economy from the impact of the devastating Christchurch earthquake in February 2011. The 6.3-magnitude quake led to 185 deaths and levelled the downtown area of New Zealand's second largest city, the economic hub of the South Island.