WELLINGTON- New Zealand’s consumer prices rose at their fastest pace in three decades, beating forecasts and raising the prospect of an unprecedented 75 basis point interest rate hike at the central bank’s policy meeting next month.
The consumer price index (CPI) increased 7.3 percent in the second quarter, speeding up from a 6.9 percent gain in the first quarter and the fastest since the June quarter of 1990 when prices rose 7.6 percent, Statistics New Zealand said in a statement on Monday.
The index rose 1.7 percent quarter-on-quarter, slightly slower than the 1.8 percent rise in the first quarter. The inflation readings were above economists’ expectations in a Reuters poll for a 1.5 percent rise for the quarter and a 7.1 percent annual gain.
The New Zealand dollar shot up 0.5 percent and the two-year swap rate rose 11 basis points to 4.15 percent after the data, on growing expectations the central bank will again hike rates at its August meeting.
Most economists expect the Reserve Bank of New Zealand (RBNZ) to raise rates by 50 basis points next month but the hotter-than-expected inflation has raised the possibility the bank may follow global peers in delivering a supersized hike.
“A 75 bp hike at the August (monetary policy statement) is a very real possibility, particularly if the labor market data on 3 August delivers another hawkish surprise,” ANZ said after the data.
The RBNZ last week raised its official cash rate to 2.50 percent, the latest in a series of hikes that has taken the benchmark from a record low 0.25 percent in October last year.
