New Zealand consumer prices rose 2.5 percent on the year in the three months to March, picking up from 2.2 in the three months to December. This is just above the consensus forecast of 2.3 percent but leaves headline inflation within the Reserve Bank of New Zealand's target range of 1.0 percent to 3.0 percent for the third consecutive quarter after it had been above that range since early 2021. The index advanced 0.9 percent on the quarter after increasing 0.5 previously, above the consensus forecast of 0.7 percent.

The increase in headline inflation in the three months to March reflects an increase in food price inflation from 1.3 percent to 2.6 percent, a smaller fall in transport costs, and a rebound in education costs. Price changes were relatively steady in other major categories.

The RBNZ reduced the official cash rate by 25 basis points to 3.50 percent at its most recent meeting last week and have now lowered policy rates by a cumulative 200 basis points over their last five meetings after an extended period of restrictive policy settings. In the statement accompanying last week's decision, officials advised that the inflation outlook is less certain, arguing that it will be impacted by several factors, some of which are ambiguous and could offset each other. Today's data showing headline inflation is steady within the target range is likely to support the case for another rate cut at their next scheduled policy meeting late-May.

CPI seen up 0.7 percent on quarter and 2.3 percent on year in Q1 versus gains of 0.5 percent and 2.2 percent in Q4, well within the 1-3 percent RBNZ comfort range. Food and fuel prices up but core prices are seen stable.

The consumer price index (CPI) measures the changing price of a fixed basket of goods and services purchased by New Zealand households. The selection and relative importance of the goods and services in the CPI basket represents the overall expenditure pattern of New Zealand households.

The aim of the CPI is to measure price changes of the same sample of products at each outlet over time. When there is a change in the size or quality of any of the goods or services in the basket, an adjustment is made to ensure that the price change shown in the CPI is not affected by the change in size or quality.

The CPI represents $88.9 billion spent on goods and services by New Zealand households, at June 2011 quarter prices. This is based on information from the 2009/10 Household Economic Survey and other sources. The CPI has an index reference period of the June 2006 quarter equal to 1000.

A price index measures the change in price between time periods for a given set of goods and services. It summarizes a set of prices for a variety of goods and services collected from a number of outlets. The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments. Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion. By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.

The CPI is used to help set monetary policy and for monitoring economic performance. It is used by the government to adjust New Zealand Superannuation and unemployment benefit payments once a year, to help ensure that these payments maintain their purchasing power. Employers and employees use the CPI in wage negotiations.