Table of Contents
Summarised by Centrist
New Zealand’s annual inflation rate has crept up to 2.7%, but softer-than-expected data and a sluggish economy are keeping a rate cut on the table for August.
Stats NZ confirmed consumer inflation rose from 2.5% to 2.7% in the June quarter, driven by rising rents and local government taxes. The quarterly CPI increase was just 0.5%, below the 0.6% forecast by economists and well down from 0.9% in Q1. Despite the uptick, the annual figure came in slightly below market expectations, and the Reserve Bank’s own 2.6% forecast.
The Reserve Bank of New Zealand (RBNZ) had paused its rate-cutting cycle in July after slashing the OCR by 225 basis points since August 2024. But economists say the recent CPI data doesn’t derail the case for another cut, especially with inflation still within the RBNZ’s 1–3% target band and signs of weak domestic demand.
Markets are increasingly pricing in a rate cut at the next meeting in August. “There is considerable spare capacity in the economy,” analysts note, with low business confidence and soft consumer activity continuing to weigh on growth.
Global uncertainty, including President Trump’s escalating tariff threats, is also influencing central bank caution. But unless inflation breaks decisively higher, the RBNZ is expected to resume easing to support the cooling economy.
