New Zealand inflation expectations steady-RBNZ

WELLINGTON, Aug 25 - Inflation expectations in New Zealand for the next two years were subdued in the third quarter, while the economy is expected to improve by 2011, a survey showed on Tuesday.

The quarterly survey of expectations on behalf of the Reserve Bank of New Zealand showed business managers forecast annual inflation to average 1.8 percent over the coming year, unchanged from the previous survey in May.

Two-year inflation expectations edged up to 2.3 percent from 2.2 percent in the previous quarter.

The survey also showed expectations for a slowdown in wage increases and a rise in unemployment to 7.2 percent by June 2010.

The economy is expected to rise 0.8 percent in the coming year, and is seen growing 2.0 percent over the next two years, the survey showed.

The RBNZ has lowered interest rates by a total of 575 basis points to 2.50 percent since July 2008, taking its cash rate to a record low to combat the domestic and global recessions.

The survey showed that monetary conditions were expceted to be tighter than neutral by June 2010.

All 15 economists in a Reuters poll expect the central bank to hold rates steady at its next meeting on Sept. 10 [ID:nWEL468905].

The survey of 79 business managers also showed respondents expect the consumer price index to rise by 0.4 percent in the third quarter and by 0.5 percent in the three months to Dec. 31.

New Zealand's annual rate of inflation eased to 1.9 percent in the year to June, its lowest since the third quarter of 2007.