Currency traders reacted immediately by sending the New Zealand dollar down half-a-cent against the U.S. dollar, to US$0.727 cents. It fell to 93.18 Australian cents from 93.88 cents and the trade-weighted index declined to 77.33 from 77.96.
According to data released by the Office for National Statistics (ONS) on Tuesday (18 July), inflation as measured by the Consumer Price Index (CPI) rose 2.6% year-on-year last month, compared with a four-year high of 2.9% recorded last month, which analysts had expected to remain unchanged.
Ben Brettell, Senior Economist at Hargreaves Lansdown, commented: "UK inflation fell unexpectedly in June to 2.6%, easing the pressure on squeezed household budgets and substantially reducing the likelihood of an August interest rate rise".
"Holidays were cheaper all round in the June quarter, with prices for accommodation services down 8.1 percent, and package holidays down 1.4 percent", Attewell said.
In May the cost of living came in at 2.9 per cent, and Governor Mark Carney recently said that tolerance for above target inflation is fading.
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The month-on-month Food and Non Alcoholic Beverages inflation rate stood at -0,45 percent in June 2017, shedding 0,52 percent on the May 2017 rate of 0,07 percent. "These effects are temporary and may lead to some variability in headline inflation".
The central bank's forecasts show it does not expect rates to lift until September 2019 at the earliest.
The flat outcome, well below the 1% increase reported in the March quarter, saw the year-on-year increase fall to 1.7%. Dairy prices were also up, with prices for butter reaching their highest price since the series began, Stats NZ said.
Growth slowed to 0.2 per cent in the first quarter of 2017, with second-quarter data due to be published next Wednesday. Prices for new housing rose 1.8 percent in the June quarter for an annual increase of 6.4 percent. The year-on-year Food and Non Alcoholic beverages inflation prone to transitory shocks stood at 1,82 percent while the Non-food inflation rate was -0,37 percent. Inflation is still likely to have far outpaced wages over the past year, which rose by only 1.8 per cent in the year to May.
There was also a 0.1% drop in recreation - which includes cultural services, and games, toys and hobbies.
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