Food prices fell in September, adding to expectations annual inflation will be about 1.2% when official figures are released next week.
Food prices have been largely flat over the past year but the latest fall in prices of 0.8% last month was helped by a 6.5% fall in fruit and vegetable prices.
Meat prices were up 1.2%. Global beef and lamb prices have surged in recent months because of tight global supply and this is translating through to retail price increases in New Zealand.
ASB economist Christina Leung expects further increases in mean prices in coming months.
Statistics New Zealand figures showed grocery food prices fell 0.2% with lower prices for butter and cheese prominent in September.
Prices for confectionery, nuts and snacks also fell. Prices were higher for cakes and biscuits (up 4.4%) and yoghurt.
Annually, food prices fell 0.1% for the year ended September.
In the year, grocery food prices fell 2.6%, influenced by lower bread prices.
Statistics NZ price manager Chris Pike said supermarkets discounted some of their own-brand bread to about $1 in July and August.
Prices rose for some dairy products in the year, including fresh milk and yoghurt.
Fruit and vegetable prices fell 3.3% in the year.
Lower vegetable prices (down 5.7%) included decreases for tomatoes, kumara and avocados.
Meat, poultry and fish prices increased 2.2%, influenced by higher prices for chicken, lamb and beef, he said.
Ms Leung said next week's consumer price index, the official measure of inflation, was likely to be 1.2%, below the Reserve Bank's 1.3% forecast published in the September monetary policy statement.
''With little urgency for the Reserve Bank to resume its tightening cycle, we continue to expect the Reserve Bank will keep the OCR [official cash rate] on hold at 3.5% until March 2015.''
