New Zealand's annual inflation surges to three-decade high

[WELLINGTON] New Zealand's annual consumer price index (CPI) hit a three-decade high in the fourth quarter, outpacing analyst forecasts and cementing a view that the central bank will look to tighten monetary policy further next month.

Annual inflation rose 5.9 per cent, from 4.9 per cent in the previous quarter, rising at the fastest rate since a 7.6 per cent annual increase in the year to the June quarter of 1990, Statistics New Zealand said in a statement on Thursday.

CPI rose 1.4 per cent in the quarter ending December from a rise of 2.2 per cent in the third quarter.

The data topped economists' expectations in a Reuters poll for a 1.3 per cent rise for the quarter, with an annual rise of 5.7 per cent. In its November monetary policy statement, the Reserve Bank of New Zealand forecast a 1.2 per cent rise in quarterly CPI and an annual rate of 5.7 per cent.

The main driver for the surging inflation was housing and transport prices, Statistics NZ said. Prices for construction and rentals for housing jumped, while petrol prices also increased 30 per cent in the year to the December 2021 quarter.

The New Zealand dollar moved little to the news as markets have already priced in more policy tightening by the central bank this year to cool inflationary pressures.

"The persistent rise in inflation to the highest levels in 30 years will be worrying the RBNZ, that's why we expect the Bank to hike aggressively in the first half of this year," said Ben Udy, analyst at Capital Economics.

The RBNZ, which is due to meet on Feb 23, has already hiked rates twice at its last two meetings, and signalled further tightening this year as it looks to keep inflation near its target 1-3 per cent range and cool a red-hot housing market. REUTERS