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MNI BRIEF: Food Cost Surge Underlines RBNZ Inflation Fears

MNI (Perth)

The Reserve Bank of New Zealand's concerns about high domestic food prices feeding into elevated inflation were underscored by the 8.3% y/y increase in the food price index to a 13-year high, driven by a 7.7% increase in grocery prices and a 16% increase in fruit and vegetable prices, according to StatsNZ data released Thursday. Seasonally adjusted food prices rose 0.9% m/m for a second month, extending the run of consecutive months of rising food prices to 18.

The RBNZ has warned it will continue to tighten policy "at pace" after it raised the Official Cash Rate by 50bp to 3.5% on Oct 5, highlighting sustained global pricing pressure in its post-meeting comments, stating that “food and energy prices are being particularly exacerbated by the war in Ukraine." The RBNZ is expected to hike rates by 50bp at its next meeting on Nov 23 (see MNI STATE OF PLAY: RBNZ Hikes 50bp, No Slowing Down In 2022).

The persistently high level of food inflation over recent months is expected to be reflected in the September quarter Consumer Price Index set to be released on Oct 18. The RBNZ's latest Monetary Policy Statement forecast an annual rate of inflation in the September quarter of 6.4%. A rise of 6.6% is expected by economists.

Robert covers RBA and RBNZ policy and the economy for MNI in Australia.
Robert covers RBA and RBNZ policy and the economy for MNI in Australia.

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