Persistent CPI Pressure Is Expected To Build Over Time

"Recent data indicate the New Zealand economy remains robust despite the ongoing impact from international border restrictions. Aggregate economic activity is above its pre-COVID-19 level. Household spending and construction activity are at high levels and continue to grow. Business investment is now responding to capacity pressures and labour shortages, and measures of economic confidence continue to improve."

• "The Committee reiterated that there will be near-term spikes in headline CPI inflation in the June and September quarters. These reflect factors that are either one-off in nature, such as high oil prices, or expected to be temporary in duration, such as supply shortfalls and higher transport costs."
• "The Committee agreed that, in the absence of any further significant economic shocks, more persistent consumer price inflation pressure is expected to build over time due to rising domestic capacity pressures and growing labour shortages. However, the Committee noted that uncertainties remain as to the pace and magnitude of any pass-through of costs onto medium term inflation, especially given reported underutilisation of labour, modest wage growth, and well anchored inflation expectations."