New Zealand has had its smallest annual inflation increase in two years.

CPI rose 4.7 percent in the year to December- in line with the expectations from economists.

That's down from the 5.6 percent recorded for the year to September, and down from the 7.3 percent rise recorded in the year to June 2022.

Kiwibank economist Jarrod Kerr says this means the Reserve Bank will start cutting interest rates to provide relief to households.

"We've had inflation running at over 7 percent, and people had that in the back of their mind. Now inflation's running at over 4 percent, that's quite a drop. By this time next year, inflation will run closer to 2 percent."

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