New Zealand inflation slows to 3.7% in third quarter

New Zealand's annual inflation rate slowed to 3.7% in the third quarter, down from 4.1% in the previous quarter, according to data from Statistics New Zealand. While the Consumer Price Index (CPI) rose 0.7% quarter-on-quarter, both figures were lower than market expectations.

Despite the deceleration, inflation remains above the Reserve Bank of New Zealand's target range of 1% to 3%. Price pressures remain widespread, with over 85% of CPI basket items costing more than they did a year ago. Energy remains a primary driver; although gasoline prices fell 6.5% compared to the second quarter, they rose 19.1% year-on-year.

Market analysts suggest that the Reserve Bank may continue its tightening cycle. There is a high probability of further interest rate hikes to combat persistent core inflation and external pressures, such as rising fuel costs linked to Middle East shipping disruptions. Some economists warn that the timing of potential rate hikes is sensitive, as the country approaches an election, balancing the need for price stability against risks to economic growth.