Inflation edges up again — what it means for your wallet and what comes next

For the first time in over two years, inflation in New Zealand has ticked upward — and while it’s still within the Reserve Bank’s target range, the mix of rising costs has sparked concern for households and cautious analysis from economists.

The Consumers Price Index (CPI) rose by 2.5% annually in the March quarter, with prices up 0.9% just in the last three months. That marks the first annual increase since inflation peaked at 7.3% in mid-2022.

Although 2.5% is still within the Reserve Bank’s acceptable inflation range of 1% to 3%, it’s the first sign in a while that prices are creeping upward again—a reality many New Zealanders already feel at the supermarket checkout, petrol station, or in their rent bills.

What’s behind the rise?

According to Infometrics chief executive Brad Olsen, this was a “surprise jump” — and not a pleasant one. “It’s an uncomfortable combination of pressures,” he said. “Not panic-worthy, but enough to make the Reserve Bank take a breath before any interest rate cuts.”

The biggest cost increases came from areas closest to home:

• Rents rose 3.7% over the past year.
• Local council rates and fees surged by 12.2%.
• Food staples like milk, cheese, and eggs jumped 8.7%.
• Meat and poultry costs rose by 6.9%.

These increases were only partially offset by a 2.8% drop in petrol prices over the year — though fuel did spike by 4.6% just in the last quarter, which could signal more fluctuation ahead.

In Auckland, petrol prices dropped more sharply thanks to the Government scrapping the 10 cent per litre Regional Fuel Tax, leading to a 5.8% drop compared to just 1.3% in the rest of the country.

How does this impact interest rates?

The rise in inflation has complicated things for the Reserve Bank, which had been preparing for potential interest rate cuts this year to support the economy.

Economists are still optimistic about future cuts — but they’re treading carefully. BNZ economist Mike Jones said:

“Inflation creeping back up is annoying, sure, but it’s not a deal-breaker. We still expect rate cuts — probably three more this year.”

ASB economist Wesley Tanuvasa agrees, predicting the Official Cash Rate (OCR) will fall to 2.75% by August 2025, though he warns that global uncertainties could change that plan.

What’s the Government saying?

Finance Minister Nicola Willis is holding onto the bigger picture, saying the latest numbers confirm the “era of high inflation is over”. She pointed out that this is the third quarter in a row where inflation has stayed within target.

But Labour’s finance spokesperson Barbara Edmonds disagrees — arguing that ordinary families are still being squeezed.

“Prices are going up again, just as people were catching their breath. Rates, rent, groceries — it all adds up, and tax cuts haven’t made life cheaper.”

Where to from here?

Economists say the Reserve Bank now faces a delicate balancing act: it must weigh ongoing domestic price pressures (like rent and food) with global uncertainties, including trade wars and currency fluctuations.

Even though inflation is expected to hover just above 2% for now, it’s not guaranteed to stay there, especially if global events push up import prices or if domestic costs continue to climb.

In short: inflation might be under control, but it’s far from over.