New Zealand’s Faster Inflation Bolsters Case for More Rate Hikes

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomePMN BusinessNew Zealand's Faster Inflation Bolsters Case for More Rate HikesNew Zealand’s annual inflation accelerated to the fastest pace in more than two years, fanned by soaring fuel prices and bolstering the case for the Reserve Bank to execute back-to-back interest-rate increases.Author of the article: You can save this article by registering for free here. Or sign-in if you have an account.Customers refuel a vehicle at a Mobil petrol station in Auckland, New Zealand, on Wednesday, April 1, 2026. New Zealand diesel prices have surged 72% since the end of February as the Middle East conflict disrupts global supply chains, increasing costs for industry, farmers and the transport sector. Photo by Fiona Goodall /Bloomberg(Bloomberg) — New Zealand’s annual inflation accelerated to the fastest pace in more than two years, fanned by soaring fuel prices and bolstering the case for the Reserve Bank to execute back-to-back interest-rate increases.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe Consumers Price Index climbed 4.1% in the second quarter from a year earlier, up from 3.1% in the first quarter and exceeding economists’ estimate of 4%, government data showed Tuesday. Prices advanced 1.5% from the preceding three months, also beating the 1.4% estimate.The RBNZ raised the Official Cash Rate by a quarter point to 2.5% earlier this month, its first hike in three years, and said it aims to wind back stimulus at a time of elevated inflation. The central bank, which anticipated CPI of 3.9%, expects prices will cool over the next 12 months and return toward the midpoint of its 1-3% target band.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try again“We are hoping that returning the OCR to broadly neutral levels will be sufficient to ensure that inflation settles at 2%,” said Mark Smith, senior economist at ASB Bank in Auckland. “However, if generalized pricing pressures continue to pick up, there is the risk that the RBNZ may have to use the brake pedal and push the OCR above 3.25% in 2027.”The kiwi edged higher against the dollar and the yield on two-year government notes rose 2 basis points to 3.67% as money markets solidified expectations the RBNZ will raise rates again in September. Traders also anticipate a follow-up hike in either October or December, and another one in February, according to meeting-linked swaps data.Most economists expect the central bank will raise rates by another quarter point at the next meeting on Sept. 2. However, there is more uncertainty about how quickly it will move to neutral thereafter, with some arguing there is scope to wait until 2027 for subsequent hikes.Key to the outlook is how renewed hostilities in the Middle East impact fuel costs and demand. Last week, RBNZ Chief Economist Paul Conway said the flare-up in fighting between the US and Iran suggested upside to the central bank’s inflation projections.Imported or so-called tradables prices rose 4.9% from a year earlier, picking up from 2.5% in the first quarter, today’s report showed. The acceleration was led by a 27.5% surge in the price of gasoline and a 71% climb in the cost of other fuels, primarily diesel — most of which occurred in the second quarter, the data showed.Annual non-tradables inflation, a closely watched indicator of domestic price pressures, was 3.4% in the second quarter, slowing from 3.5% in the three months through March.Besides fuel, electricity and local government land taxes were the largest contributors to the annual inflation rate, the report said.Non-tradables prices increased 0.6% in the quarter, matching economists’ estimatesTradables prices rose 2.7% in the quarter; economists expected a 2.5% gainCore inflation excluding food, energy and fuel was 2.5% versus 2.6% in the first quarter—With assistance from Matthew Burgess.(Adds economist’s comment in fourth paragraph, updates market reaction.)This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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