{"id":10500,"date":"2025-07-21T09:13:16","date_gmt":"2025-07-21T09:13:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/10500\/"},"modified":"2025-07-21T09:13:16","modified_gmt":"2025-07-21T09:13:16","slug":"inflation-spike-muddies-reserve-bank-rate-cut-outlook","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/10500\/","title":{"rendered":"Inflation spike muddies Reserve Bank rate cut outlook"},"content":{"rendered":"<p>The Reserve Bank of New Zealand released CPI inflation data today, which showed that New Zealand inflation lifted further in Q2 to 2.7%.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/07\/NZ-annual-inflation.png\" width=\"660\" height=\"538\" alt=\"NZ annual inflation\"\/><\/p>\n<p>Major bank ASB noted that while the result wasn\u2019t a surprise, \u201cit is an unwelcome development after NZ endured years of high interest rates to tame rampant inflation\u201d.<\/p>\n<p>\u201cThe last thing New Zealanders (and the RBNZ) need right now is the prospect of inflation re-invigorating and crimping the extent to which the RBNZ can cut interest rates and stimulate the fledgling economic recovery\u201d.<\/p>\n<p>Advertisement<\/p>\n<p>As illustrated below by ASB, rising food costs were partly responsible for the lift in CPI.<\/p>\n<p><img src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/07\/NZ-food-inflation.png\" width=\"660\" height=\"528\" decoding=\"async\" loading=\"lazy\" alt=\"NZ food inflation\"\/><\/p>\n<p>\u201cEvery major burger ingredient has shot up in price (the inclusion of vegetables in the ingredients list is slightly aspirational). The reasons for the price increases are varied and follow a period when food prices were falling back after their post-COVID jump\u201d, ASB noted.<\/p>\n<p>Household energy costs have also \u201crisen sharply, in part through higher transmission line charges\u201d, whereas \u201cconstruction costs dropped over the quarter and fuel prices eased back further\u201d.<\/p>\n<p>Advertisement<\/p>\n<p>More broadly, \u201ctradable inflation has rebounded into positive territory after a period of falling prices that did much to drag overall inflation down from its 7+% peak\u201d.<\/p>\n<p>\u201cThe return to a more normal pace of modest but positive tradable price inflation means still-high non-tradable inflation is no longer being offset\u201d, ASB wrote.<\/p>\n<p>Justin Fabo from <a href=\"https:\/\/www.antipodeanmacro.com\/\" rel=\"nofollow noopener\" target=\"_blank\">Antipodean Macro<\/a> created the following chart showing that CPI inflation is already at the peak the Reserve Bank had forecast in its May monetary policy statement.<img src=\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/07\/NZ-CPI-versus-RBNZ.png\" width=\"660\" height=\"565\" decoding=\"async\" loading=\"lazy\" alt=\"NZ CPI vs RBNZ\"\/><\/p>\n<p>Advertisement<\/p>\n<p>Therefore, the Reserve Bank\u2019s decision to hold the official cash rate earlier this month seems justified, despite the weakening economic conditions.<\/p>\n<p>ASB still expects the Reserve Bank to cut the official cash rate in August by 25 bp, owing to the weak economy and growing spare capacity.<\/p>\n<p>That said, the official cash rate outlook remains \u201cin a push-me pull-me state: risks of spillover from the current inflation spike against the risk of weaker inflation pressures from any short-term stalling in economic recovery or tariff impacts\u201d.<\/p>\n<p>Advertisement<\/p>\n","protected":false},"excerpt":{"rendered":"The Reserve Bank of New Zealand released CPI inflation data today, which showed that New Zealand inflation lifted&hellip;\n","protected":false},"author":2,"featured_media":10501,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-10500","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/10500","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=10500"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/10500\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/10501"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=10500"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=10500"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=10500"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}