Inflation has hit the highest level in a generation, with increases in petrol and last year’s rise in GST causing the consumer price index to climb by 5.3 per cent over the last 12 months.
We also saw the New Zealand dollar rise against the greenback ahead of today’s consumer price index data, with gains on global commodity and equity markets helping the currency shrug off regional growth concerns.
Analysts had expected inflation of 5.1 per cent, and the higher rate is likely to see anticipation that the Reserve Bank will have to increase the official cash rate more aggressively than expected.
This morning the probability of an interest rate increase in October rose to 80 per cent, based on interest rates markets, Westpac economists said.
Inflation is now running at its highest level since the second quarter of 1990, when the CPI hit 7.6 per cent. The 1990 spike was also caused by an increase in GST, when it was raised from 10 per cent to 12.5 per cent.
