New Zealand’s inflation rate is now expected to hit the Central Bank’s target more quickly than was initially thought, signalling a healthier post-pandemic recovery period. The yearly inflation rate held stable during the fourth quarter of last year – a substantially better outcome when compared to the prior estimates of economists who predicted further percentage drops.
Holiday accommodation led the improved consumers’ price index, followed by home construction costs rising to their highest levels in two years. Airline ticket prices to Australia likewise increased, while other areas such as non-tradable consumer prices, as well as fuel and energy, also rose.
According to New Zealand economist Dominick Stephens, COVID-19 had spiked prices for consumer goods and commodities when global demand was high and supply was limited. However, this increase originally lasted for only a short period, as rebounding supply levels helped suppress the inflation rate.
In light of these new developments, investors expect that the Reserve Bank of New Zealand’s expected rate cuts might no longer be needed due to signs of stable inflation in the fourth quarter of last year. The news adds to New Zealand’s significant achievement in keeping the pandemic under control within its borders, while maintaining relatively good economic health as well.
Negative OCR rates would require banks to pay for storing their money with the Reserve Bank, but current housing market performance has helped avoid this outcome. Despite the country’s near-negative OCR rate as initially predicted, it is expected that the current rate will remain throughout the year.