{"id":255222,"date":"2026-01-28T03:37:10","date_gmt":"2026-01-28T03:37:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/255222\/"},"modified":"2026-01-28T03:37:10","modified_gmt":"2026-01-28T03:37:10","slug":"nicola-willis-says-latest-inflation-data-a-blip-but-acknowledges-reserve-bank-will-eventually-have-to-start-hiking-interest-rates","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/255222\/","title":{"rendered":"Nicola Willis says latest inflation data a \u2018blip\u2019, but acknowledges Reserve Bank will eventually have to start hiking interest rates"},"content":{"rendered":"

Nicola Willis this morning told Parliament\u2019s Finance and Expenditure select committee<\/a> her confidence that inflation would sit within the target was \u201cbased on my confidence in the Reserve Bank\u2019s ability to use its monetary policy tools consistent with its mandate to reach its statutory requirement to keep inflation below 3% over the medium term\u201d. <\/p>\n

Labour revenue spokeswoman Deborah Russell said that would mean increasing interest rates. The RBNZ hikes the OCR to increase interest rates, making borrowing more expensive, in order to bring inflation down. <\/p>\n

Willis told the Herald afterwards that the Reserve Bank wouldn\u2019t necessarily need to respond with interest rate hikes \u201cimmediately\u201d. <\/p>\n

\u201cThe Reserve Bank\u2019s job is to look at, in that quarterly figure, what are transitory factors, such as the spike in international air flights, that won\u2019t continue into the future and therefore, what is happening with underlying inflation. <\/p>\n

\u201cIt is not the case that the Reserve Bank necessarily needs to respond to one quarter with an increase to the Official Cash Rate.\u201d <\/p>\n

Asked if she was expecting an OCR increase this year, Willis said when OCR increases happen, \u201cwhich at some point in the future it will do, is a decision for the Reserve Bank\u201d. <\/p>\n

\u201cEssentially, the Reserve Bank has had its foot down on the accelerator, in terms of putting that stimulus into the economy through a lower Official Cash Rate. As the economy grows faster and recovers, the Reserve Bank will start easing its foot on that acceleration pedal.\u201d <\/p>\n

Willis said after years of inflation being outside of the target range, \u201cthe Government got inflation back on target where it was sustained for more than one year\u201d. <\/p>\n

\u201cWe have had a blip in this quarter. I do not expect to see that sustained.\u201d <\/p>\n

The latest annual inflation rate of 3.1% is the fourth consecutive increase to the CPI. It follows a 3% increase in the 12 months to September 2025.<\/p>\n

\u201cThere are a number of factors affecting inflation, some of which have been international, some of which relate to domestic challenges, particularly rates increases have been a significant contribution to inflation,\u201d said Willis.<\/p>\n

\u201cIt remains the case that inflation has been in target most of the time, except for this last quarter. The Reserve Bank will be monitoring that closely.\u201d<\/p>\n

\"FinanceFinance Minister Nicola Willis says the latest data was a ‘blip’. Photo \/ Mark Mitchell<\/p>\n

In a research note last week, ANZ said headline inflation breaching the RBNZ\u2019s target range would \u201cnot sit well\u201d with the central bank\u2019s Monetary Policy Committee. <\/p>\n

\u201cFor the RBNZ, today\u2019s data will make for uncomfortable reading, but indicators of spare capacity suggest there is still some, albeit diminishing, underlying disinflation in the pipeline that should help return headline inflation to within the 1-3% target band. <\/p>\n

\u201cThat said, when combined with the recent sharp improvement in the activity data, today\u2019s release tips the balance towards hikes this year being likelier than not. <\/p>\n

\u201cWe are now forecasting the first 25bp hike in December, with two follow-up hikes at the February and April 2027 meetings taking the OCR back to an assumed neutral level of 3% as before.\u201d <\/p>\n

Infometrics similarly said that the \u201ccontinued acceleration\u201d in inflation, despite spare capacity, would start \u201cto raise concerns at the Reserve Bank\u201d. <\/p>\n

\u201cHaving headline inflation rising, and no further moderation in non-tradeables inflation, is a clear concern, particularly when partial economic indicators suggest strengthening economic growth for the end of 2025 and into 2026,\u201d the update said. <\/p>\n

\u201cIf inflation was accelerating when economic growth was low or negative, there is a significant likelihood that inflation could accelerate further as growth gains momentum.\u201d <\/p>\n

Infometrics said it was holding to the view that the OCR would start to increase from November. <\/p>\n

\u201cHowever, strong growth and inflation numbers in the next few months, combined with a possible hawkish approach from the new Reserve Bank Governor, could force interest rate rises back on the table as soon as May.\u201d<\/p>\n

Jamie Ensor is the NZ Herald\u2019s Chief Political Reporter, based in the Press Gallery at Parliament. He was previously a TV reporter and digital producer in the Newshub Press Gallery office. He was a finalist in 2025 for Political Journalist of the Year at the Voyager Media Awards.<\/p>\n","protected":false},"excerpt":{"rendered":"Nicola Willis this morning told Parliament\u2019s Finance and Expenditure select committee her confidence that inflation would sit within…\n","protected":false},"author":2,"featured_media":255223,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[122805,1643,147546,138,3013,3311,3105,219,30692,246,9978,305,25902,13986,1943,12469,700,6722,111,139,20484,69,3333,7676,10665,312,4497,61,1533,792],"class_list":["post-255222","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-acknowledges","tag-bank","tag-blip","tag-business","tag-but","tag-consumer","tag-data","tag-economy","tag-eventually","tag-finance","tag-grows","tag-have","tag-hiking","tag-index","tag-inflation","tag-interest","tag-latest","tag-minister","tag-new-zealand","tag-newzealand","tag-nicola","tag-nz","tag-price","tag-rates","tag-reserve","tag-says","tag-start","tag-to","tag-will","tag-willis"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/255222","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=255222"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/255222\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/255223"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=255222"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=255222"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=255222"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}