New Zealand central bank chief economist warns of sticky inflation, suggesting further interest rate hikes may be in the cards
New Zealand's chief economist Paul Conway said on Tuesday that domestic inflation may not slow as fast as the central bank predicts, signaling the possibility of further interest rate hikes in the future. The Reserve Bank of New Zealand last week lowered its third-quarter inflation forecast to 3.3% from 4.3%, reflecting lower fuel prices after the United States and Iran reached a temporary agreement. However, in recent days, as a new round of conflicts broke out in the Middle East, oil prices rebounded. Speaking in Wellington, Conway said, "I think developments in the Middle East over the past week indicate upside risks to our forecast for the September quarter. If inflationary pressures caused by the conflict in the Middle East persist longer than expected, we will take measures to respond." The RBNZ's hawkish stance and a slew of positive economic data prompted traders to bet on two more interest rate hikes this year and pushed the New Zealand dollar higher. Traders also expect another rate hike in the first quarter of 2027.