July 19, 2016 7:00am by David Farrar

Inflation remains low

Borrowers appear set to see even lower interest rates in the wake of lower than expected inflation.

On Monday Statistics New Zealand revealed that the consumer price index (CPI) rose by a less than expected 0.4 per cent in the year to June 30.

With the Reserve Bank forecasting that inflation would be 0.6 per cent, economists now see the central bank as odds-on to cut the official cash rate to 2 per cent on August 11, a new all time low.

Westpac, which was already forecasting an August cut, said market pricing of financial products suggested there was now an 80 per cent chance that the Reserve Bank would cut the OCR on August 11, up from 70 per cent before the figures were released.

So long as one doesn’t have deflation, I think low inflation is great.

In the last three years prices overall have risen just 2.5% over three years. While from 2005 to 2008 prices went up 9.5%.