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New Zealand inflation eases to 3.7% as fuel dip masks broader pressure

New Zealand inflation eases to 3.7% as fuel dip masks broader pressure

Rule Changes

The Reserve Bank surprises with a 4-3 hold at 2.75%, saying further hikes are likely but conditional as inflation heads to 4.4%

October 29th, 2026: Kiwi dollar falls after RBNZ hold; Breman says weaker currency bad for inflation

Overview

Updated Nov 1

New Zealand's annual inflation slowed to 3.7% in the September quarter from 4.1% in June, Stats NZ said. Petrol prices fell 6.5% over the quarter, while a 6.2% rise in local council rates pushed the other way.

On October 28 the Reserve Bank held the official cash rate at 2.75% in a 4-3 vote, surprising economists who had expected a rise to 3%. The bank said annual inflation will climb to 4.4% in the December quarter on higher fuel prices and a weaker dollar. It said tighter policy is likely to be needed but depends on the outlook.

Why it matters

A surprise hold keeps mortgage rates lower for now, but the bank says fuel costs could push inflation to 4.4% and force more increases.

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Key Indicators

3.7%
Annual CPI inflation, September 2026 quarter
Down from 4.1% in June; above the RBNZ's 3% target ceiling.
0.7%
Quarterly CPI change
Annual inflation of 3.7% came in below the 3.8% markets expected and the RBNZ's 3.9% September forecast; the quarterly rise was 0.7%.
19.1%
Petrol price increase over 12 months
Stats NZ said it was the largest single contributor to annual inflation.
54.9%
Share of CPI basket up more than 3% over the year
Stats NZ figures reported by interest.co.nz put it at 54.9%, up from 38.5% in June; the Reserve Bank said 56% on a weighted basis.
2.75%
Official cash rate
Held at 2.75% on October 28 in a 4-3 vote; three members wanted a rise to 3%.
4.4%
RBNZ December quarter inflation forecast
The Reserve Bank expects annual inflation to rise to 4.4% in the December quarter, driven by fuel prices and a weaker dollar.
4.7%
ASB and BNZ December quarter forecast
ASB's Mark Smith and BNZ's Stephen Toplis both pick 4.7%, above the Reserve Bank's 4.4% projection.
4%
Cash rate peak Westpac expects in 2027
Westpac's economics team projected an OCR peak of 4% next year in commentary published October 27.

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People Involved

NG
Nicola Growden
Prices spokesperson, Stats NZ
Released September 2026 CPI data
MS
Mark Smith
Senior economist, ASB
Expected October and December hikes; the Reserve Bank held in October
ST
Stephen Toplis
Chief economist, Bank of New Zealand
Argued another hike was required; the Reserve Bank held at 2.75% on October 28
 Nicola Willis
Nicola Willis
Finance Minister
Says oil shock keeps price pressures elevated
 John McDermott
John McDermott
Former Assistant Governor, Reserve Bank of New Zealand
Said core inflation would drive an October 28 hike; the bank held instead
 Jarrod Kerr
Jarrod Kerr
Chief economist, Kiwibank
Backed an October hike; the Reserve Bank held and said further increases remain likely
 Kelly Eckhold
Kelly Eckhold
Economist, Westpac
Cautioned against rushing further tightening; the Reserve Bank held on October 28
 Anna Breman
Anna Breman
Governor, Reserve Bank of New Zealand
Chaired the October 28 meeting where the bank held the OCR at 2.75% in a 4-3 vote

Organizations Involved

Stats NZ
Stats NZ
Government statistics agency
Official source of CPI data

New Zealand's official statistics agency, publishes the quarterly Consumer Price Index.
Reserve Bank of New Zealand
Reserve Bank of New Zealand
Central bank
Held the official cash rate at 2.75% on October 28 in a 4-3 vote; further increases likely but conditional

New Zealand's central bank, targets annual inflation between 1% and 3%.
ASB Bank
ASB Bank
Commercial bank
Expected October and December hikes; the Reserve Bank held in October

New Zealand bank whose economics team publishes inflation analysis.
New Zealand Institute of Economic Research
New Zealand Institute of Economic Research
Independent economic research institute
Backed a hike to 3.00% on October 28; the Reserve Bank held at 2.75% instead

Independent economic research institute that runs a Monetary Policy Shadow Board ahead of Reserve Bank reviews.

Timeline

July 2026 October 2026

10 events Latest: October 29th, 2026 · 1 week ago
Tap a bar to jump to that date

  1. Kiwi dollar falls after RBNZ hold; Breman says weaker currency bad for inflation

    Latest Market Reaction

    The New Zealand dollar fell more than 1% after the hold. Governor Anna Breman said a weaker dollar was 'not good for inflation' but downplayed temporary currency moves.

  2. Reserve Bank holds OCR at 2.75% in 4-3 vote

    Policy Decision

    Four members voted to hold and three wanted a 25 basis point rise to 3%. The bank said annual inflation will rise to 4.4% in the December quarter and further increases are likely but conditional.

  3. NZIER shadow board backs hike to 3.00%, splits on what follows

    Analysis

    The NZIER Monetary Policy Shadow Board, in recommendations recorded October 21 and reported October 27, backed a 25 basis point rise at the October 28 review. Most members favoured further tightening over the coming year, with preferred settings in 12 months of 3% to 4%, but they split on how fast to move.

  4. Westpac joins call for October hike, sees 4% peak

    Forecast

    Westpac's economics team said it now expects a 25 basis point rise on October 28, citing firm underlying inflation and higher fuel prices, and projected further increases to an OCR peak of 4% next year.

  5. Economists call it a 'Halloween hike' as market pricing points higher

    Analysis

    BNZ research head Stephen Toplis said market pricing implied an OCR of about 4.4% next year and expected inflation of 4.7% this quarter. Kiwibank's Jarrod Kerr said the Reserve Bank has no influence over about 45% of the CPI, and Infometrics' Brad Olsen said no one expects a rate rise to stop petrol prices climbing.

  6. ANZ says CPI is stronger than it looks, backs October hike

    Analysis

    ANZ's review says core inflation measures were considerably more hawkish despite the lower headline, and expects the Reserve Bank to remove a further 25 basis points of stimulus on October 28.

  7. ASB lifts December quarter inflation forecast to 4.7%

    Forecast

    ASB senior economist Mark Smith says sharp fourth quarter rises in fuel, airfares and construction costs will push annual inflation above 4%. The bank expects OCR increases in both October and December.

  8. Q3 CPI released: annual inflation eases to 3.7%

    Data Release

    Stats NZ reports 0.7% quarterly rise, below the 0.8% forecast. Annual rate eases from 4.1% but stays above the RBNZ target band.

  9. Petrol prices fall 6.5% in September quarter

    Data Point

    A lull in Middle East hostilities and improved global supplies ease pump prices after the June surge. International airfares jump 14.3%, the largest quarterly rise since December 2022.

  10. June quarter inflation hits 4.1%, a two-year high

    Data Release

    Petrol jumped 20.1% in the quarter, helping push annual inflation to its highest level in two years.

Scenarios

1

Reserve Bank raises cash rate to 3%

Deadline passed (Oct 28, 2026)

Discussed by: Market pricing and most NZ forecasters, including ASB and BNZ

Did not happen on October 28: the Reserve Bank held the official cash rate at 2.75% in a 4-3 vote. Three members wanted a 25 basis point rise to 3%.

2

Fourth-quarter inflation tops 4.5%

Likely Resolves by Jan 31, 2027

Discussed by: Stephen Toplis of BNZ (4.7%) and broader economist consensus

Renewed Middle East hostilities have pushed pump prices back above April highs, and a kiwi dollar about 4% below RBNZ assumptions makes imported fuel costlier in local currency. Economists project annual inflation between 4.5% and 4.7% for December. If realized, inflation stays above the 3% target ceiling into 2027.

3

Reserve Bank holds cash rate at 2.75%

Deadline passed (Oct 28, 2026)

Discussed by: RBNZ's own September signal that a pause was possible

Happened on October 28: four members voted to hold at 2.75% and three voted for a rise to 3%. The bank said further increases are likely but conditional.

4

Official cash rate reaches 3.75% next year

Possible Resolves by End of 2027

Discussed by: Financial market pricing reported by Reuters and Business Recorder

Markets imply further tightening next year to at least 3.75%, well above the Reserve Bank's own September projection of 3.2%. The bet rests on fuel and import costs keeping annual inflation above 3% through 2027.

5

Reserve Bank hikes to 3%, then holds for an extended pause

Possible Resolves by Feb 17, 2027

Discussed by: Kiwibank's Jarrod Kerr and UOB's economics team

Kerr backs a 25 basis point rise on October 28 but wants the Reserve Bank to signal it is done for a while, arguing policy certainty supports business confidence. UOB expects the bank to raise the cash rate to 3.00% on October 28 and then hold, watching how higher energy prices and a weaker currency pass through to inflation.

6

Reserve Bank raises OCR at December review

Possible Resolves by End of 2026

Discussed by: Three RBNZ committee members who voted for an October hike; ASB and BNZ forecasts

The Reserve Bank said tighter policy is likely to be required but remains conditional on the economic outlook. Three of seven committee members wanted a rise on October 28, and ASB and BNZ expect further tightening. A December move would take the official cash rate to 3%.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

2008

2008 global oil price spike (July 2008)

Crude oil surged past $140 a barrel in mid-2008 as Middle East tensions and tight supply gripped markets. Pump prices hit records in oil-importing countries, feeding headline inflation across the developed world.

Then

The global financial crisis destroyed demand within months; oil fell below $40 by year-end and inflation reversed sharply.

Now

Showed how fast fuel shocks move headline inflation, and how quickly they unwind when demand collapses.

Why this matters now

New Zealand imports all its refined fuel since its only refinery shut in 2022, so pump prices track global crude directly. Today's oil rebound threatens the same transmission into CPI.

2021-2023

New Zealand inflation surge and RBNZ tightening (2021-2023)

After pandemic stimulus, NZ inflation peaked above 7% in 2022, a three-decade high, driven partly by energy and food costs following Russia's invasion of Ukraine. The RBNZ raised the official cash rate from 0.25% to 5.5% in about 18 months.

Then

Higher borrowing costs cooled demand, bringing inflation back to the 1-3% target band by late 2024.

Now

Established the RBNZ's playbook: aggressive, front-loaded rate hikes when inflation looks persistent.

Why this matters now

Today's 3.7% inflation and expected oil-driven rebound test whether the RBNZ repeats that playbook or tolerates above-target inflation to protect growth.

Sources

(21)
+15
Reuters via Investing.com Stats NZ RNZ Forex Factory (Westpac analysis) ANZ interest.co.nz Business Recorder MNI Market News Reuters via StreetInsider ActionForex Westpac IQ The Post UOB Global Economics & Markets Research Kiwibank Thrive HQ BNZ Newsroom Reserve Bank of New Zealand CNBC RNZ The Post The Post