New Zealand Q3 CPI forecast at 3.8% ahead of expected RBNZ rate increase

The NZD/USD pair is trading near 0.57 ahead of the data, after recovering from a mid-October trough that was its weakest since April 2025. If the headline reading comes in at 3.9% or higher, or if core measures are firm, that would likely cement expectations of a rate hike and boost the kiwi. A figure around 3.7% could slightly reduce those expectations without completely removing them. Looking past the release, crude oil is the key factor; with oil prices staying elevated and the currency weaker, higher costs for imported energy are expected to keep New Zealand's inflation outlook and the RBNZ's tightening stance tilted to the upside through the end of the year.

New Zealand's third-quarter inflation is anticipated to dip only temporarily, as oil prices and a weaker kiwi are already setting the stage for a rebound in the fourth quarter, which will keep the central bank on a tightening course.

Summary:

• The Q3 CPI release is scheduled for 10:45am Wellington time on Thursday from Statistics NZ.
• The consensus forecast is for annual inflation of 3.8%, a decline from 4.1%, compared with the RBNZ's own projection of 3.9%. The quarterly CPI is expected at 0.8%, down from 1.5%.
• Forecasts range from 3.7% (Westpac) to 4.0%, with ANZ at 3.8% and BNZ at 3.9%.
• The third-quarter easing is mainly driven by lower average fuel prices, partially offset by higher council rates, building costs, and food.
• Swap markets indicate about an 80% probability of a 25-basis-point rate increase to 3.00% on October 28.
• Renewed Middle East tensions and a weaker New Zealand dollar point to a Q4 rebound, with some projections reaching as high as 4.7%.

According to the median estimate from 16 economists polled by Bloomberg, New Zealand's Q3 CPI, due from Statistics NZ at 10:45am Thursday Wellington time, is forecast to show annual inflation declining to 3.8% from 4.1% in the prior quarter. That figure would still be well above the RBNZ's 1% to 3% target range, and just slightly below the central bank's own 3.9% forecast from its September Monetary Policy Statement.

On a quarter-on-quarter basis, prices are expected to increase by 0.8%, a substantial deceleration from 1.5% in Q2 and precisely in line with the RBNZ's forecast. This slowdown is primarily attributable to lower average fuel expenses during the quarter, following the Middle East conflict that drove pump prices sharply up in the June period. Westpac calculates that reduced petrol and diesel costs will subtract about 0.4 percentage points from quarterly inflation.

The range of forecasts is fairly broad. Westpac is at the lower bound with 3.7%, projecting a quarterly increase of 0.7% as weaker fuel prices are counterbalanced by higher council rates, construction expenses, and food prices. ANZ expects 3.8% and BNZ 3.9%, while some other economists anticipate annual inflation staying at 4.0%. Westpac also anticipates that core inflation measures will stay elevated, with certain closely monitored indices rising to the upper end of the RBNZ's target range.

This data release is the final significant economic indicator before the RBNZ's decision on October 28. In September, the central bank raised the Official Cash Rate to 2.75%, and swap markets are pricing in about an 80% likelihood of another quarter-point rise to 3.00%. ING stated it expects a 25-basis-point increase unless there is a substantial downside surprise, and that even a modest upside surprise would strengthen the case for a rate move.

Economists generally consider any third-quarter slowdown to be short-lived. Renewed Middle East hostilities have driven New Zealand fuel prices back above April peaks. The New Zealand dollar is also trading about 4% below the average level that the RBNZ had assumed for the fourth quarter. Some domestic projections now expect annual inflation to accelerate to as much as 4.7% in the December quarter, compared with the RBNZ's 3.9% forecast. RBNZ chief economist Paul Conway has highlighted upside risks to the near-term outlook from oil and the exchange rate.

The core inflation data could be as important as the headline figure. ANZ noted that the RBNZ will look for evidence that higher fuel prices are feeding through into wider price pressures. This examination will influence not only next week's decision but also the trajectory into December, when the bank is next set to release updated forecasts.