Lucy Craymer

WELLINGTON (Reuters) – New Zealand’s annual consumer price index (CPI) hit a three-decade high in the first quarter, underlining the central bank’s hawkish stance to contain price pressures bubbling in the economy.

The annual inflation rate rose 6.9% to 5.9% from the prior quarter. This is the highest increase since the 7.6% annual rise in 1990’s year-to-date, Statistics New Zealand stated in a Thursday statement.

CPI rose 1.8% to March, after a 1.4% increase in the fourth quarter. But the data was below economists’ expectations in a Reuters poll for a 2.0% rise for the quarter, with an annual rise of 7.1%.

Statistics New Zealand reports that rising food and housing prices are contributing to rising inflation.

The March 2022 quarter saw prices for new homes rise 18% compared to the March 2020 quarter. This is the highest increase since 1985, when the series was started.

Aaron Beck, senior price manager, stated that construction firms are experiencing supply-chain problems, increased labour costs and higher demand which has pushed up the cost to build a house.

From $0.6804 before data hits dealing screens, the dollar fell 0.4% to $0.6772. The market reconsidered the possibility of another half-point rate increase and the swap rates for two-years dropped as high as six basis points, to 3.52%.

Last week’s meeting of the Reserve Bank of New Zealand was a loud one. It expressed concern about inflation in New Zealand and called for action to prevent it. Four consecutive increases were made by the central bank at their cash rate meeting. They also indicated they will continue to increase them in future quarters.