RBNZ Governor Warns of Inflation Risk from Persistently Higher Oil Prices

Reserve Bank of New Zealand Governor Anna Breman said that persistently higher oil prices are pushing near-term inflation expectations above those assumed in the September Monetary Policy Statement. The comments come just over a month ahead of the RBNZ's next scheduled decision, on October 28.

Breman highlighted the impact of rising energy costs on the inflation outlook, saying that if higher oil prices persist, they will likely result in somewhat higher near-term inflation than expected. However, she also emphasized that significant risks to the economic outlook remain, including upside and downside risks tied to energy costs and softer domestic demand.

The RBNZ expects the economic recovery to strengthen and broaden over time, with current data suggesting the recovery is continuing in the present quarter but remains uneven across sectors of the economy. Markets have generally priced a pause at the October meeting following the September 2 decision to raise the Official Cash Rate by 25 basis points to 2.75%, and nothing in Breman's remarks appears to shift that base case.