"The CPI result, while higher than most were anticipating, is consistent with inflation falling back to within the 0 to 3 percent target range in the second half of this year and is no cause for alarm," Finance Minister Michael Cullen said today.

Dr Cullen was responding to the December quarter CPI showing a quarterly increase of 1.2 percent and an annual rate of 4 percent.

He said there were a number of factors which would either come into effect or fall out of the index over the next three quarters.

"The restoration by the Government of income-related State house rentals on December 1 will affect the March figure significantly, reducing it in Treasury's estimation by 0.6 percent.

"Other downward influences which will come into account in the March quarter are the summer "petrol price war" and the effect of the rising dollar on import prices.

"And later in the year the effects of the one-off cigarette excise increase will fall out of the calculation.

"I am confident that these factors in combination will pull the inflation rate back within the 0 to 3 percent band," Dr Cullen said.

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