Economists expect a fuel-driven inflation spike ahead of Tuesday's CPI release
New Zealand's June quarter inflation figures, due for release on 21 July, are expected to mark the sharpest annual rise since early 2024, with all three major bank economics teams pointing to the same underlying driver: a sharp run-up in fuel costs tied to the Middle East conflict.
Westpac senior economist Satish Ranchhod (pictured left) forecasts a 1.5% quarterly rise taking annual inflation to 4.1%, while ASB senior economist Mark Smith (pictured right) expects 1.4% quarterly and 4% annually, noting fuel alone accounts for roughly three-quarters of the expected quarterly increase. Kiwibank's economics team puts the consensus range between 3.9% and 4.2%, describing the numbers as set to be "ugly" but not unexpected given the scale of the oil shock.
Petrol prices rose around 20% over the quarter, and diesel a striking 51%, feeding directly into what Ranchhod calls "the main driver of June's spike in consumer prices."
The forecasts come despite Stats NZ data showing petrol and diesel prices actually fell 4.2% and 12.1% respectively from May to June, following earlier increases in March and April.
Core inflation still running above target
Even stripping out fuel, price pressures remain persistent. Smith estimates core inflation is tracking in a 2.3%–3% band, consistent with Ranchhod's own core measures, which range from 2.4% to 2.9% — both above the RBNZ's 2% target midpoint despite soft wage growth and a weak labour market.
Kiwibank's economics team frames the risk in blunt terms, warning that domestic firms are updating prices more frequently than before, which raises "a higher chance for supply-shock driven price increases to become embedded in domestic markets."
Rate outlook hinges on how long pressure lasts
For mortgage rates, the key question isn't the June print itself but what follows.
Smith expects the RBNZ to continue normalising the official cash rate from September in 25 basis point steps, reaching 3.25% by year's end, while acknowledging "two-sided risks to the OCR path."
Kiwibank's economics team strikes a similarly watchful tone, citing RBNZ chief economist Paul Conway's warning that "when above-target inflation changes expectations and price-setting behaviour, monetary policy may need to respond more firmly to re-anchor inflation expectations."
For more insights, read the Westpac, Kiwibank, and ASB reports.
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