That “paved the way” for the Reserve Bank to cut the Official Cash Rate in August, said ASB senior economist Mark Smith.
“The figures did not change our core view that the increase in annual CPI inflation has further to run,” Smith said.
“We still expect annual CPI inflation to move above 3% in the September 2025 year.”
The 2.7% increase follows a 2.5% annual increase in the 12 months to the March 2025 quarter.
That was the highest annual rate in 12 months.
But the RBNZ would “look through the tick up in near-term overall CPI inflation” as the global and local economy slowed, he said.
“After earlier tapping the monetary policy brakes, the RBNZ is expected to press the accelerator and actively provide policy support. We expect the OCR to be cut by 25bps [basis points] in August to 3%.”
The data was a bit softer than the market expected, and so wholesale rates and currency were a bit weaker, BNZ senior market strategist Jason Wong said.
“It just provides some comfort that the Reserve Bank will probably ease again, probably in August, which is what the consensus was,” Wong said.
The New Zealand dollar and wholesale interest rates edged lower on the better-than-expected data.
After a few minutes trading, the NZ dollar was down 20 pips at US59.45c and key two-year swap rates were down by 3.5 basis points at 3.16%.
The largest upwards contributor to the annual inflation rate was local authority rates and payments, up 12.2%.
Rates contributed 13% of the 2.7% annual increase.
“Rates are captured once a year in the September quarter,” Growden said.
“The 12.2% annual increase for rates was captured in the September 2024 quarter. Next quarter, we will capture changes in rates as of July 1 2025.
”Petrol, down 8% in the 12 months to June 2025, offset the increase in rates.
“Petrol made a significant downward contribution to annual CPI.
“The CPI excluding petrol increased 3.2% in the 12 months to June 2025.”
The average price for one litre of 91 octane fuel was $2.54 in the June 2025 quarter, down from $2.76 in the June 2024 quarter.
The CPI rose 0.5% in the June 2025 quarter, compared with the March 2025 quarter, which was up 0.9%.
The largest riser in the June quarter was the cultural services category, up 9.5%, (contributing 26% of the 0.5% quarterly rise).
This was driven by subscriptions to streaming services.
Non-tradeable V tradeable
Tradeable inflation, which measures final goods and services that are influenced by foreign markets, rose 1.2% in the year to June.
Non-tradeable inflation, which measures final goods and services that don’t face foreign competition (and is an indicator of domestic demand and supply conditions), rose 3.7%.
This was the slowest rate in four years, suggesting that domestic price pressures are continuing to moderate, said Infometrics chief forecaster Gareth Kiernan.
Non-tradeable inflation traditionally runs higher than tradeable inflation.
There were other promising signs that core inflation was falling, Kiernan said.
“The proportion of the CPI that recorded quarterly price increases was 55%, the lowest since the COVID-19 lockdown in June 2020,” he said.
“Perhaps even more critically, 36% of the CPI recorded a decline in prices, which was the largest proportion to record a fall since 2014.”
The larger proportion of items falling in price pointed towards the effects of weak demand and spare capacity across the economy, he said.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
