Asia Economy

New Zealand's second-quarter inflation quickens more than expected

Key Points
  • The consumer price index (CPI) rose 7.3% in the second quarter speeding up from a 6.9% gain in the first quarter and the fastest since the June quarter of 1990 when prices increased 7.6%, Statistics New Zealand said in a statement on Monday.
  • The CPI rose 1.7% quarter-on-quarter, slightly slower than the 1.8% rise in the first quarter. The data was above economists' expectations in a Reuters poll for a 1.5% rise for the quarter and a 7.1% annual rise.
  • The Reserve Bank of New Zealand (RBNZ) has raised interest rates to 2.50% from a record low 0.25% in October last year. It has signaled that further rate hikes are needed if it wants to get ahead of inflation.
A pedestrian walking past the Reserve Bank of New Zealand (RBNZ) headquarters in Wellington, New Zealand, on Thursday, Aug. 9, 2018. The consumer price index (CPI) rose 7.3% in the second quarter speeding up from a 6.9% gain in the first quarter and the fastest since the June quarter of 1990 when prices increased 7.6%, Statistics New Zealand said in a statement on Monday.
Birgit Krippner | Bloomberg | Getty Images

The consumer price index (CPI) rose 7.3% in the second quarter speeding up from a 6.9% gain in the first quarter and the fastest since the June quarter of 1990 when prices increased 7.6%, Statistics New Zealand said in a statement on Monday.

The CPI rose 1.7% quarter-on-quarter, slightly slower than the 1.8% rise in the first quarter. The data was above economists' expectations in a Reuters poll for a 1.5% rise for the quarter and a 7.1% annual rise.

The Reserve Bank of New Zealand (RBNZ) has raised interest rates to 2.50% from a record low 0.25% in October last year. It has signaled that further rate hikes are needed if it wants to get ahead of inflation.

ASB Bank said it thinks annual inflation might now have peaked but that it is still worryingly high.

"The risk of entrenched high inflation keeps the onus on the RBNZ delivering a front-loaded pace of OCR hikes and restrictive monetary settings so as to lean against inflationary pressure," it said.

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The New Zealand dollar rose slightly after the data showed inflation was even hotter than many had expected.

The main drivers of the 7.3% annual inflation were rising prices for construction and rentals for housing, Statistics New Zealand said in a statement.

The New Zealand government on Sunday moved to offset some of the inflationary pressures by extending the duration of cuts to the fuel excise tax, road user charges and public transport fares.