New Zealand Economic Research Institute: Rising inflation and interest rates remain the main headwinds for the New Zealand economy

The New Zealand Institute of Economic Research said in its latest quarterly forecast that central banks around the world are rapidly raising interest rates, and strong demand and continued capacity pressure are keeping the cost of the New Zealand economy high.

The Reserve Bank of New Zealand is expected to raise interest rates further sharply to curb demand and curb inflation. But it is expected that around mid-2023, the negative impact of rising interest rates on demand will become more pronounced, so the RBNZ will not need to continue to raise rates (dramatically) as currently expected.

Despite this, the institute expects the official cash rate to rise further and peak at 5% in the coming year.