That means all the headline Consumer Price Index (CPI) data for the third quarter has now been released. It reaffirms a robust 1.0% increase quarter-over-quarter, above expectations of a 0.9% increase. This increase is in line with the Reserve Bank of New Zealand’s (RBNZ) forecast. It is close to the consensus year-over-year growth of 3.0%. The increase in headline CPI can be explained by the increased cost of shelter, which is defined as property and related services.
That’s why we are concerned that in Q2, the headline CPI hit 2.7%. The current reading of 3.0% is the highest level since the 2Q of 2024. Our analysis reveals that the housing and household utilities group had an outsized effect on the annual inflation rate. The main drivers were the growing cost of electricity, skyrocketing rent, and escalating local authority rates and water charges.
CPI came in 1.0% q/q, a tick above the 0.9% forecasted for Q2 according to BBH FX analysts. Much of this increase was the result of property tax rates and property-related services. This jump represents a continuation of underlying trends in the housing market that have long been a bipartisan worry among policymakers.
While the headline CPI has increased due to a rise in energy prices, the moderation of underlying inflation continues. It continues to sit well within the RBNZ’s target band of 1 to 3%. This reflects a positive domestic backdrop and gives the RBNZ leeway to maintain a hawkish stance on rate cuts. The analysts continued, “More importantly still, the supposedly evil underlying inflation is at target – the RBNZ’s 1 to 3% target range. That reduces the amount of cuts RBNZ can be seen delivering and is NZD negative. pic That’s a double-whammy to NZD.
The most recent data continues to underscore the need to act, with persistent inflationary pressures in New Zealand. Increasing property values is the elephant in the room in this discussion. The RBNZ’s projections are almost certain to lay the groundwork for future monetary policy decisions. They want to achieve as much economic growth as possible without allowing inflation to rise.