NZ Inflation Hits Two-Year High as Fuel Prices Drive Rate Hike Expectations

New Zealand's annual inflation rate reached its highest level since December 2023, at 4.1% in the June quarter.

Fuel prices were a significant contributor to this increase, with petrol and diesel prices rising by 20% and 50% respectively over the quarter.

However, ASB economists note that underlying pressures remain contained, with domestic non-tradeable inflation easing slightly from 3.5% in March to 3.4% in June.

The Reserve Bank has already raised interest rates by 25 basis points to 2.5%, but bank economists are debating how much further the OCR will need to rise.

ASB now expects inflation to remain close to 4% over the remainder of 2026, with an upward revision from its previous outlook, and has pencilled in 75 basis points of OCR hikes this year.