Inflation Stuck at the Top: Reserve Bank’s Rate Cut Hopes Put on Ice

By Lions Roar News Economic Desk

WELLINGTON, NEW ZEALAND (Thursday, January 22, 2026) — New Zealand’s fight against inflation is hitting a stubborn plateau. New data set for release this Friday is expected to show that the Consumer Price Index (CPI) remains at the absolute ceiling of the Reserve Bank’s (RBNZ) 1% to 3% target band, likely delaying any hopes for lower interest rates in the near term.

While the RBNZ had previously forecasted a drop to 2.7%, major bank economists now warn that a “summer surge” in travel and fuel costs has kept the annual rate pinned at 3% or higher.

✈️ The “December Surprise”: Why Inflation Won’t Budge

Economists point to several seasonal factors that spiked during the final quarter of 2025, preventing the cost of living from falling as quickly as hoped.

• Travel Costs Skyrocket: ANZ senior economist Miles Workman noted a massive 33% month-on-month rise in international airfares during December.
• The Tourism Effect: Higher accommodation prices during the peak holiday season and rising petrol prices at the pump have offset the typical seasonal drop in fruit and vegetable prices.
• Economic Recovery: With GDP and manufacturing indexes showing signs of a rebound, the economy is heating up, providing less room for price cooling.

🏛️ The RBNZ Response: Will Rates Go Up?

The Official Cash Rate (OCR) currently sits at 2.25%, and while a hike isn’t expected immediately, the timeline for the next move has shifted.

• ASB Forecast: ASB expects annual inflation to hit 3.1%. They believe the RBNZ won’t be in a “mad rush” to move the OCR but warned they may step in with a 50-basis-point tightening if inflation stays stuck at 3%.
• BNZ Outlook: BNZ senior economist Doug Steel expects a 2.9% headline rate. He suggests the “balance of risk” is tilting toward an interest rate hike happening earlier than the 2027 timeline previously indicated by the RBNZ.
• The Silver Lining: Beneath the surface, “core inflation”—which excludes volatile food and energy prices—remains closer to the 2% midpoint, suggesting the underlying trend is still technically moving in the right direction.

📊 Inflation Scorecard: Bank vs. Reserve Bank