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* Consumer price inflation stagnates in Q2
* Annual inflation 1.7 percent in Q2
* Data below analyst, central bank forecasts (Updates with details, comments, context)
By Ana Nicolaci da Costa
WELLINGTON, July 18 (Reuters) - New Zealand inflation slowed more than expected in the second quarter as falling transport prices offset a rise in the cost of food, prompting some investors to push back bets on the timing of a possible central bank interest rate hike.
Consumer price inflation stagnated in the second quarter and annual inflation slowed sharply from multi-year highs seen in the first three months of the year, according to official data on Tuesday.
That was also below the Reserve Bank of New Zealand's forecast, sending the local dollar down as low as $0.7261.
The latest data is likely to reinforce the central bank's view that it is in no rush to hike interest rates.
"There isn't much evidence of inflation picking up," said Ben Jarman, economist at JP Morgan. "The RBNZ would be challenged to be dragged in the global hiking cycle. It's not clear why this central bank would turn hawkish anytime soon."
Consumer prices grew 1.7 percent on an annual basis, down from 2.2 percent in the January to March period and below a 1.9 percent forecast in a Reuters poll.
The central bank has maintained a neutral policy stance even as New Zealand has enjoyed some of the strongest growth among advanced economies and as annual inflation picked up briskly in the first quarter.
While annual inflation was within the RBNZ's 1-3 percent inflation target, it was below its 2.1 percent forecast for the second quarter of 2017.
On a quarterly basis, consumer prices were unchanged, down from 1.0 percent in the first quarter.
Economists in a Reuters poll had expected consumer prices to rise 0.2 percent while the central bank had expected them to increase 0.3 percent on a quarterly basis between April and June.
A rise in food prices, buoyed by a higher vegetable prices, was offset by falling transport prices, the data showed.
Jason Wong, senior markets strategist at BNZ said there had been "a bit of a pushing out of monetary policy expectations" after the inflation data.
Interest rate futures pricing suggests markets have pushed back their expectations for the first full 25 basis point rate hike to August 2018 from around June 2018 ahead of the CPI data, he added.
Other analysts expected rate hike bets to be pushed out even further.
"While the RBNZ has already been on the side of arguing that (rate) hikes are a long way off, today's result should put a severe dent in market expectations that the RBNZ will be hiking rates by mid-2018," Westpac said in a research note. (Reporting by Ana Nicolaci da Costa; Additional Reporting by Swati Pandey in Sydney; Editing by Eric Meijer and Sam Holmes)