Mortgage rates seem likely to stay at their current lows as inflation continues to slide back to the lower half of the Reserve Bank's target of 1% to 3%.
ANZ-National Bank chief economist Cameron Bagrie said official cash rate hikes were so far off there seemed little point even putting an estimate of the exact timing of a hike on the table.
"In short, today's CPI [consumer price inflation] is likely encourage the Reserve Bank to remain on the sidelines for still longer."
However, hurdles to a rate cut from the current 2.5% remained high, especially given the resurgence in the housing market, he said.
Statistics New Zealand figures released yesterday confirmed forecasts the CPI, the official measure of inflation, grew 0.5% in the three months ended March, with annual inflation falling to 1.6%.
The inflation result was slightly lower than the Reserve Bank's forecast of 0.7% for the quarter.
The composition of inflation was largely as expected with an outsized 14.5% increase in tobacco excise taxes contributing 0.3% to headline inflation. Without that, inflation would have increased a subdued 0.2% in the quarter. Also contributing to an increase in inflation was a 2.3% lift in petrol prices, largely reflecting an increase in global oil prices.
Offsetting those increases was a sharp fall in recreation and culture and international air fares. ASB economist Jane Turner said package holidays and air fares fell sharply, as was typically the case in the "very seasonal" component.
Book prices also recorded a surprisingly large fall, down 14%.
Statistics New Zealand noted there was a change in mix of best-selling adult fiction titles. The department tracked the top 10 book titles.
"We suspect the recent popularity of the cheaper Hunger Games book series could have contributed to this measured decline," she said.
The official cash rate is reviewed next Thursday.
At a glance
• March quarter inflation 0.5%
• Annual inflation 1.6%
• Tobacco and petrol prices main cause of rise
• Book prices and package holiday prices fall
