Inflation hits two-year high

Annual inflation rose to a two-year high of 2.7 per cent in 2004 after the December quarter Consumer Price Index (CPI) rose an unexpectedly high 0.9 per cent.

Economists on average had forecast the index to rise 0.7, which would have left the September quarter inflation rate unchanged on 2.5 per cent.

The Reserve Bank is now more likely to carry out its threat made in December to hike interest rates again, despite the probability of the economy slowing later this year.

The bank had expected a 0.7 per cent rise and may now be concerned inflation will next year rise above the 1-3 per cent target band it is mandated to maintain inflation within.

Statistics New Zealand said today a rise in international airfares was the most significant reason for the surprisingly high quarterly inflation number. Without airfares, the CPI would have been up just 0.6 per cent.

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