New Zealand's Inflation Jumps in 2Q on Fuel-Price Surge

By James Glynn

SYDNEY--New Zealand consumer prices jumped in the second quarter on the back of surging fuel costs, deepening fears that interest rates will need to rise significantly in coming months.

The consumer price index rose 1.5% over the quarter and by 4.1% over the year to the end of June, according to data from StatsNZ released Tuesday. Annual inflation in the first quarter stood at 3.1%.

The inflation rate is now more than twice the level targeted by the Reserve Bank of New Zealand and comes amid warnings from senior central bank officials that firms appear increasingly ready to quickly pass costs on to consumers.

While oil prices have come off their peaks of February and March, the recent resumption of hostilities in the Middle East is again pushing them higher, leaving New Zealand exposed to another international shock.

Economists also estimate that at 2.50%, the RBNZ's official cash rate could be as much as 75 basis points below neutral, meaning the central bank still has more work to do to cool down inflation.

But policy makers are also in a bind as unemployment remains elevated while higher interest rates risk snuffing out tentative signs of economic recovery.

The economy began the year showing signs of recovery as it finally shrugged off years of recession.

Already fixed mortgage interest rates have been raised by banks, doing some of the work of the central bank to curb demand.

The largest upwards contributor to the annual inflation rate were gasoline prices, which jumped 27.5% over the quarter. Gasoline prices were up 20.1% in the second quarter.

Higher gasoline prices accounted for almost a quarter of the 4.1% annual increase in the CPI, the data showed.

Diesel fuel prices increased 71% in the second quarter, with New Zealand households spending about eight times more on gasoline than on diesel, StatsNZ said.

If gasoline and diesel prices had not changed, the CPI would have risen 2.9% in the 12 months to the end of June, it added.

Other big contributors to the annual CPI increase were electricity prices, local authority rates and payments, and construction of new housing, it added.

More than 80% of the CPI basket increased in price in the 12 months to the June 2026 quarter. In contrast, only about 15% of the basket fell in price, the data showed.

-Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

July 20, 2026 19:23 ET (23:23 GMT)