Inflation in New Zealand may have peaked, but a rate growth is still expected

Inflation in New Zealand peaked at 7.3% in the second quarter of the year. According to ANZ Research the part of the reason is the drop in oil prices from recent highs.

Economists from ANZ Research predict that a return to 2% inflation will be a long way and will require the Reserve Bank of New Zealand to increase the official monetary rate to 4% by the end of the year. In addition, according to economists at ANZ Research, this level needs to be maintained for several years.

Economists believe that, despite the peak, the risk of rising inflation again is still possible. For example, with rising labor costs, it is probable that inflation will not return to the RBNZ target range of 1% to 3%.

"Global inflation risks are also multifaceted: extremely tight labor markets, climate change, geopolitical tensions, energy shortages and disruptions to trade can all result in a long-term period of high global inflation in the future," they said.

And it will also make it much more difficult for the RBNZ to get inflation back on target.