"There's no question now that the OCR will rise further," said Infometrics economist Brad Olsen.
"We now think a 75 basis point increase to the OCR is necessary to get ahead of (or more realistically, try and catch up to) inflation."
ANZ economists went further, raising their forecast for the OCR peak to 5 per cent and arguing for two 75 basis point hikes in a row.
KiwiBank also lifted its forecast peak to 5 per cent and ASB now sees a peak of 5.25 per cent.
Thanks to falling fuel prices across the past few months, inflation was expected to land between 6.5 and 7 per cent.
Instead, the 7.2 per cent leap followed an annual increase of 7.3 per cent in the June quarter, and an annual increase of 6.9 per cent in the March 2022 quarter.
Inflation culprits outed
The main driver for the 7.2 per cent annual inflation in the September 2022 quarter was housing and household utilities.
Rising prices for construction, rentals for housing, and local authority rates were all pushing up prices.
For the quarter, the Consumer Price Index rose 2.2 per cent. And in the latest quarter, vegetable prices rose an astonishing 24 per cent.
"This is the largest quarterly rise in vegetable prices since the series began in September 1999," Stats NZ prices senior manager Nicola Growden said.
"Tomatoes, lettuce, and broccoli drove this rise in vegetable prices."
Prices for the construction of a new house increased 17 per cent in the September 2022 quarter compared with the September 2021 quarter.
Stats NZ released the new figures at 10.45 this morning.
On the domestic front, a tight labour market is keeping costs high.
Market reacts
On financial markets, the 2-year swap rate jumped to 5.05 per cent on expectations higher inflation will mean the Reserve Bank needs to lift the official cash rate higher.
The New Zealand dollar was little changed after the release. It bought US56.40c.
Economists at Kiwibank said at least the path for inflation seemed to be downhill from here.
"Several indicators suggest that the pressure on global supply chains has eased materially in recent months," Kiwibank Economics said shortly after the CPI news.
"Global shipping costs have firmly turned south, and capacity is expanding with more ships being built. However, it's a long way back to 2 per cent, with the Kiwi currency slowing the return."
But there was no sugarcoating today's data.
"The CPI report was a shocker, to put it politely. 66 per cent of items within the CPI basket rose. That's very high."
As expected, food and housing were the main contributors, Kiwibank Economics added.
Inflation from housing and construction was still on the surprisingly high side, they added.
Prices in the transport category also rose, despite a decline in petrol prices. But airfares rose 20 per cent.
Economists had been looking, and hoping, for signs that non-tradable (domestic) inflation was easing.
"The bulk of the decline in headline inflation is expected to come from a sharp drop in petrol prices," ANZ senior economist Finn Robinson said ahead of the data release.
"While that's absolutely welcome, the fact that there's unlikely to be any sign of a broad-based easing in underlying inflation pressures means monetary policymakers can take only limited comfort from the headline fall."
ANZ had forecast annual non-tradeable (domestic) inflation to stay high at 6.3 per cent, and measures of core inflation to stay strong, but ease from recent highs.
"All up, [the] inflation report is unlikely to contain the evidence needed to convince the RBNZ that underlying inflation has turned the corner," Robinson said.
"Unless there's a step change in the outlook, we see the RBNZ on track to lift the OCR to a peak of 4.75 per cent in May 2023."
