“Higher interest rates now would not prevent the oil-related rise in inflation already in train.”Meanwhile, hiking interest rates sooner would likely compound any downturn in economic activity caused by the rising cost of living. So, even with a substantial lift in the inflation outlook, Westpac still expects the RBNZ will be hesitant to hike rates sooner than previously anticipated. Last week, I answered a question about why the Reserve Bank continued to cut interest rates even though inflation was rising last year. There has to be some sense of realism about how high interest rates can go without utterly crushing an economy. Too much can inflate an economy and flatter economic growth, which won’t look so good on a per capita basis.

Source: New Zealand Herald March 17, 2026 20:01 UTC