NZ inflation remains at concerning levels

Inflation Surge Fuels Expectations of 2026 Rate Increase

Expectations for an interest rate hike in 2026 have grown sharply after annual CPI inflation climbed to 3.1%, its highest level in a year and a half. The Reserve Bank of New Zealand’s new Governor, who is intensely focused on controlling inflation, is unlikely to be pleased with these results.

The quarterly inflation rate jumped by 0.6%, far exceeding the central bank’s forecast of just 0.2%. Both tradable and non-tradable inflation surpassed expectations: tradables increased by 0.7% compared to the projected 0.1%, while non-tradables rose by 0.6% against a 0.4% estimate. While missing forecasts is concerning, the bigger issue is that the headline inflation figure now starts with a three.