NZ Central Bank: Will Weaker Demand Offset Price Increases?

RBNZ Governor: Weaker Demand May Offset Price Increases

Reserve Bank of New Zealand (RBNZ) Governor Anna Breman stated that the central bank is closely monitoring how much weaker demand from higher energy costs will hold back other price increases, a key determinant for how high interest rates will go.

Central Bank's Stance

Appearing before lawmakers, Breman said households are turning more cautious and it is unclear if businesses will be able to pass on higher costs en masse. The RBNZ held interest rates steady at 2.25% on Wednesday and warned that rate hikes would come sooner and by more than expected to counter a war-driven global energy shock.

Inflation and Energy Prices

Breman noted that fuel prices are currently the major impact on inflation data, but they are also keeping an eye on how higher fuel and transport costs are feeding through to other products. The central bank remains focused on bringing inflation back within the 1% to 3% target band.