Wednesday Mar 29, 2023

Global Inflation Woes Continue as New Zealand’s Inflation Rates Highest in Three Decades

Global inflation woes continue as New Zealand’s inflation rates highest in three decades

The high inflation rates around the world do not seem like coming down any time soon. The current data from New Zealand where the inflation has touched a three decade high is beating forecasts. Most experts are expecting the Central bank of New Zealand to increase rates by 50 basis points. Consumer Price Index (CPI) for New Zealand is up 7.3 % in the second quarter and its up from 6.9 % in the first quarter.

Additionally, higher than expected inflation rate has raised possibility that the central bank could follow its competitors around the world in passing sharper interest rate hikes. Central bank of New Zealand has raised rates to 2.5% from record low rate of 0.25% in October 2021.  It has also signaled plans to raise interest rates to 4% by mid-2023.

Prior to inflation data, most economists had not expected the central bank to increase rates by so much. The Central bank of New Zealand expects now continuous gains of 50 basis points to continue till November 2022. This means the spot rate end point of 4% will happen instead of 3.5%

New Zealand’s biggest private bank Westpac said in a note that, much of the strength in consumer prices is due to large increases in cost of necessities such as food, gasoline and housing and it noted that the current high inflation rates are broad- based.

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