News: UPDATE 1-NZ's Q3 consumer price index higher than expected but will not stop rate cut

(Adds detail, comment from economist, market reaction)

WELLINGTON, Oct 18 (Reuters) - New Zealand's consumer price index (CPI) rose a higher-than-expected 0.2 percent in the third quarter but economists are still expecting a rate cut in November.

Annual inflation was also 0.2 percent, data from Statistics New Zealand showed. That compared to 0.4 percent in the prior quarter.

Economists polled by Reuters had forecast the CPI to be unchanged for the quarter, with an annual rise of 0.1 percent.

New Zealand's central bank is mandated to keep annual inflation in a 1-3 percent band, with a focus on the midpoint. It is widely expected to cut rates by 25 basis points to a record low 1.75 percent on Nov. 10 as inflation remains well below target.

"Today's result is consistent with our expectation for a 25 basis point reduction in the official cash rate in November," said Westpac Bank Acting Chief Economist Michael Gordon.

Housing-related prices were the main upward contributor to the annual rate, up 3.2 percent on the year. This was offset by transport prices, as prices for fuel and vehicle relicensing fell.

The New Zealand dollar was trading at 0.7174 after the data from around 0.7155.

ASB Chief Economist Nick Tuffley also expects the central bank to cut the cash rate on Nov. 10 as the result was "just higher than the 0.1 percent quarter-on-quarter that the RBNZ was forecasting though in line with its annual expectation."

However, he noted the data does point to some pockets of inflation pressure and could change the panorama going forward.

While there is a risk of a further cut in 2017, "this CPI out come does not add to the case for such a move," said Tuffley.