New Zealand inflation up in March quarter

New Zealand's inflation rose 0.5 percent in the March quarter, according to the latest official data, a result analysts said meant interest rates were likely to remain on hold in coming months.

Statistics New Zealand on Thursday said the rise in the cost of living, which was in line with market expectations, was largely due to a 13.5 percent increase in tobacco and cigarette prices after a government tax hike.

"Prices were also higher for petrol, rentals for housing and insurance," it said. "These rises were partly countered by price falls for international air fares and overseas package holidays."

The result puts the annual inflation rate for the 12 months to March at 1.6 percent, comfortably within the Reserve Bank of New Zealand's 1.0-3.0 percent target band.

Deutsche Bank economist Darren Gibbs said the figures were unlikely to prompt the central bank board to lift interest rates when it meets to consider monetary policy next week.

"It was very much in line with expectations," he told Radio New Zealand.

"So together with relatively weak GDP figures in the last quarter and weakness in commodity prices of late, we're looking at another pretty dove-ish Reserve Bank statement next week."

The central bank has held rates at a record low 2.5 percent since March last year amid sluggish growth in the farm-reliant economy.

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