The New Zealand dollar is the best performing major currency today following data showing inflation in the Shaky Isles hit the central bank’s target level for the first time since 2011.

The consumer price index rose 1 per cent quarter-on-quarter in the three months to March 31, up from 0.4 per cent in the December quarter and ahead of economists’ expectations for a 0.8 per cent gain.

That pushed the annual pace to 2.2 per cent, up from 1.3 per cent in the fourth quarter, and also two-tenths of a percentage point stronger than economists forecast.

It was the quickest annual pace since the September quarter of 2011, when prices grew by a now-seemingly eye-watering 4.6 per cent.

Ben Jarman at JPMorgan said that annual inflation above 2 per cent means that “with just one more CPI result to spare before his tenure ends, RBNZ Governor Wheeler has hit the inflation target mid-point for the first time.”

Petrol prices and food prices helped drive the quarterly result, although some economists think headline inflation may have peaked for the time being.

Paul Dales at Capital Economics said:

We suspect headline inflation will dip back a bit in the coming quarters and that core inflation may follow too. But underlying price pressures appear to be stronger than both we and the RBNZ expected. The RBNZ certainly won’t rush to raise interest rates, but these data imply it might not wait until 2019 as it suggested in February.

The Kiwi dollar was up 0.5 per cent at $0.7035, and had been up by as much as 0.6 per cent.

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