It's still too early to declare victory in the fight against inflation, an investment analyst says after new data showed the consumer price index remained steady in the December quarter.
Statistics New Zealand data, released on Wednesday, showed the annual consumer price index (CPI) increased 7.2 percent in the 12 months to December 2022 - despite efforts to dampen demand.
It comes after another 7.2 percent annual increase in the September 2022 quarter and a 7.3 percent increase in the June 2022 quarter.
While the figure is lower than the 7.5 percent increase the Reserve Bank of New Zealand (RBNZ) was expecting, it's still well above its target of 1 to 3 percent.
Milford Asset Management investment analyst Katlyn Parker told AM on Thursday the numbers show inflation is still very high, despite strong action from the Reserve Bank.
Parker said non-tradable inflation, which is essentially inflation generated domestically, was lower than expected. But she said at 6.6 percent it is still "extraordinarily high".
In terms of whether inflation has peaked yet, Parker said the bigger concern is the persistence in the numbers.
"Potentially being past the peak of inflation is one thing but what actually is the bigger concern is the persistence of these inflation numbers that we're still getting, be it five, six, seven percent," she told AM co-host Melissa Chan-Green.
"Those numbers are still going to massively overshoot the RBNZ's target of 1 to 3 percent. This inflation is still stubborn. Over 75 percent of the components that go into the CPI calculation, they're still getting quarterly price increases. So it's too early to be declaring any victory in this fight against inflation we're having here in New Zealand."
Parker said the inflation figures also mean further interest rate hikes should be expected with most experts predicting an increase to the Official Cash Rate (OCR) in February. But she said there's debate over how high the RBNZ will push it.
"What's up for debate now is the quantum of that increase. So is it going to be 0.5 or 0.75 percent at the next meeting in February?
"What we could actually see at this meeting potentially is the RBNZ reassess how high they think the cash rate is going to have to go because back in November, they saw the peak OCR getting into about 5.5 percent. But that's very aggressive given the amount of tightening they've already done," she said.
But Parker added the Reserve Bank will be very careful in its messaging about potential future cuts so it doesn't undo its work.
"They'll be very much aware a lot of the steam has come out of the economy in the last few periods. But on the flip side, the Reserve Bank will be very wary about their communications because if they start talking about cutting the OCR in the near term or sooner than expected, that could ultimately see mortgage rates move lower, and undo a lot of the work that they've done in the last 12 months."
The steady CPI increase was met with concern on Wednesday with experts saying it's still "worryingly high".
CoreLogic NZ's chief property economist Kelvin Davidson said while it's good it's not increasing, it's still well above the Reserve Bank's target.
"Looking ahead, it's not totally cut and dried about what this might mean for the near-term interest rate outlook," Davidson said.
"On one hand, the figure is lower than the Reserve Bank's previous indication… But it's still a worryingly high number, and broadly speaking, above what bank economists had been anticipating.
Stats NZ said the main drivers of inflation were housing and household utilities which were pushed up by rising prices for both constructing and renting housing.
Prices for building a new house increased 14 percent in the 12 months to December, following a 17 percent increase in the 12 months to September.
Rental prices for housing increased 4.4 percent in the 12 months to December. It follows an annual increase of 4.6 percent in the September quarter.
After housing and household utilities, the next largest contributor was food.
Transport was next, driven by rising prices for both international and domestic airfares.
