RBNZ Raises Interest Rates Amid External Inflation Pressures

The Reserve Bank of New Zealand has raised interest rates for the first time in three years to combat inflation. The OCR is now at 2.50 percent, with the bank forecasting that headline inflation will peak near 4 percent before easing.

However, most of the current inflation problem is being driven by external factors, such as global oil prices and supply chain disruptions. These factors are beyond the Reserve Bank's control and have a significant impact on tradable inflation - goods and services exposed to foreign markets.

Tradable inflation rose 4.9 percent over the year to June, nearly doubling from 2.5 percent in March. Non-tradable inflation was largely stable during this period.

The main driver of the spike in tradable inflation has been petrol prices, up by 27.5 percent, with other vehicle fuels and lubricants up by more than 70 percent.