News: UPDATE 2-New Zealand inflation picks up in Q3, unlikely to alter cenbank's cautious stance

• Q3 CPI rises 0.5 pct qtr/qtr, 1.9 pct yr/yr
• Data beats expectations, NZ dollar rallies
• RBNZ unlikely to rethink neutral policy stance- analysts

(Re-casts, adds analyst quotes)

New Zealand's inflation rate jumped in the third quarter to overtake central bank forecasts, but was unlikely to alter the bank's determination to keep rates on hold for years.

The consumer price index (CPI) picked up 0.5 percent in the three months to the end of September, after a flat reading for the previous quarter, Statistics New Zealand data showed on Tuesday.

The CPI grew 1.9 percent on an annual basis, driven by housing and food costs and beating analysts' expectations for a 1.8 percent rise.

The reading was also well above the 1.6 percent predicted in August by the Reserve Bank of New Zealand (RBNZ).

The CPI news sent the New Zealand dollar to a two-week high of $0.7197, up from around $0.7178 before the release. The currency then gave up some of its gains, settling around $0.7185.

However, economists said the RBNZ was unlikely to waver from its determination to keep interest rates at record lows for years while it waited for previously-tepid inflation to stabilise around 2 percent.

"For now, inflation sits comfortably in line with the Reserve Bank's target. However, there is little that suggests a risk of inflation breaking higher, particularly with the New Zealand economy seemingly entering a slower growth phase," said Michael Gordon, senior economist at Westpac Bank.

New Zealand's previously robust economic growth slowed in recent quarters as skill shortages led to capacity constraints and red-hot house prices cooled.

Added to that was intense uncertainty about the direction of the country's next government after an inconclusive election last month left a small, nationalist party holding the balance of power.

The third quarter gains in price growth were led as usual by housing related costs, with rents rising an annual 2.2 percent.

New Zealand's booming population, stoked by record net migration, has created strong demand for housing in the past few years, though house prices themselves have eased this year as central bank restrictions on lending took effect.

Food bills rose 1.1 percent on strong global prices for soft commodities, while new government charges pushed non-tradables inflation, excluding housing, to a three year high of 2.2 percent.

"There are tentative signs that inflation's broadening beyond housing but we’ve been here before that that's petered out," said Philip Borkin, economist at ANZ Bank.