RBNZ Governor Anna Breman warned at a panel discussion today that New Zealand is being affected by global inflation shocks stemming from the Middle East conflict, noting that it has “disrupted global supply chains, pushing up prices for oil, fertilizers, and other goods facing shortages.” As a small open economy, she said, New Zealand “cannot avoid being buffeted by these global forces,” with impacts likely to vary across sectors, regions, and households.
Despite the pickup in inflation, Breman view the pressure as largely temporary. Annual CPI rose to 3.1% in Q1 2026, above the 1–3% target range, but Breman said that “much of the increase was driven by fuel prices,” while core inflation measures “have remained stable within the target band.”
Nevertheless, she stressed that monetary policy “can and should ensure that a temporary increase in inflation does not turn into enduring inflationary pressures,” with a focus on returning inflation to 2% over the medium term.
Breman added the decision to hold the OCR at 2.25% earlier this month weighed the benefits of acting pre-emptively against “the cost of unnecessarily stifling the economic recovery.” However, she reaffirmed that the RBNZ “remains ready to act decisively and in a timely manner” if signs emerge that short-term inflation is feeding into more persistent pressures, while continuing to monitor developments in the Middle East and incoming data.
