Key Facts

  • The Consumers Price Index increased 0.5% in the December quarter, giving us the lowest annual inflation rate in over two years.
  • Annual inflation fell from 5.6% to 4.7% during the three-month period, dropping to its lowest level since June 2021.
  • The Reserve Bank (RBNZ) raised interest rates from 0.25% to 5.50% by May 2023, in response to inflation rates peaking to 7.3% during the Covid pandemic.
  • Housing costs were the primary contributors to the annual inflation rate, with rent prices increasing by 4.5% in the year ended December.
  • Food prices, while a significant contributor to the annual inflation, fell by 1.2% in the last quarter of 2023.
  • New Zealand’s financial markets anticipate interest rate cuts to commence around the middle of the year, while the central bank plans to maintain a 5.5% rate until 2025.

Article Summary

In the last quarter of 2023, the Consumers Price Index in New Zealand saw a marginal increase of 0.5%, taking the annual inflation rate to a two-year low. According to Statistics New Zealand, the annual inflation rate plummeted from 5.6% to 4.7%, marking its lowest point since June 2021.

Inflation began to rise, reaching its peak at 7.3% during the Covid pandemic. This led the Reserve Bank (RBNZ) to increase interest rates from 0.25% to 5.50% by May 2023. The inflation has been on a steady decline since, as consumer demand decreased, the workforce in the labour market expanded, and supply issues caused by the pandemic were resolved.

The most significant contributor to the annual inflation rate was housing costs. Rent prices saw a 4.5% increase in the year ended December. Despite food prices being a major contributing factor to the annual inflation, they experienced a 1.2% decrease in the final quarter of 2023. Going forward, the central bank intends to hold the interest rate steady at 5.5% until 2025, although financial markets in the country predict that interest rate cuts may be initiated around the middle of the year.

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