Weaker-than-expected inflation unlikely to stop rate hikes

The annual inflation rate is expected to have remained stubbornly high, at around 7 per cent, in the March quarter. Westpac economists see the annual inflation rate coming in at 6.9 per cent; BNZ and Kiwibank economists forecast 7.1 per cent; and ANZ and ASB economists 7.2 per cent - the level it was in the December and September quarters. Even if the inflation reading isn’t as bad as expected by the RBNZ, the rate will still be well beyond its 1 to 3 per cent target range. Economists believe the RBNZ will be mindful of not giving the impression it’s weakening its battle against inflation. If businesses expect inflation to persist and their costs to keep rising at a rapid rate, they’d keep lifting their prices accordingly, exacerbating the problem.