Figures from Stats NZ said the Consumer Price Index (CPI) rose by 3% over the 12 months leading up to the September 2025 quarter.
This increase follows a 2.7% increase recorded over the 12 months ending in the June 2025 quarter. Power prices increased by 11%, while rates went up by 8.8%.
The Reserve Bank of New Zealand aims to keep the annual inflation rate within a target range of 1% to 3%. This target band guides monetary policy decisions to maintain price stability and support sustainable economic growth.
“The 3% annual inflation rate in the September 2025 quarter is the highest since the June 2024 quarter, when it was 3.3%,” prices and deflators spokesperson Nicola Growden said.
The housing and household utilities category accounted for the biggest share of the annual inflation rate increase. The key contributors within this group were electricity (up 11.3%), rent (up 2.6%), and local authority rates and payments (up 8.8%).
The three largest contributors represent approximately 17% of the total weight within the Consumer Price Index basket.
According to Growden, the “annual electricity increases are at their highest since the late 1980s, when there were several major reforms in the electricity market.”
“The 11.3% annual increase in electricity prices is the largest since the March 1989 quarter, when they rose 12.8%.”
Economists had generally anticipated that the annual inflation rate would be around 3%.
However, there was broad consensus that this figure would mark the peak of the current inflation cycle, enabling the Reserve Bank to overlook this temporary rise and proceed with another cut to the Official Cash Rate in November.
ASB is forecasting a 25 basis point cut to the Official Cash Rate in November and notes the possibility that an additional rate reduction may be required.