The IMF forecasts New Zealand inflation to peak near 4% mid-2026, delaying recovery and complicating RBNZ policy decisions.
New Zealand’s inflation is projected to rise to around 4% in mid-2026 before easing in 2027, according to the IMF’s latest assessment. The surge, driven by oil price shocks and global uncertainty, follows a first-quarter inflation print of 3.1% year-on-year and is expected to keep price pressures above the Reserve Bank of New Zealand’s target band until year-end.
The economy likely contracted in the second quarter of 2026, with growth forecasts revised to 2.0% for the year and 2.7% in 2027. The IMF warned that the RBNZ should remain data-dependent, avoiding aggressive policy shifts as stagflation risks cloud the outlook. Fiscal policy is expected to stay cautious, with buffers rebuilt as growth stabilizes.
Markets are parsing the report as a signal for prolonged policy restraint, with the kiwi dollar and rates likely to reflect a more cautious RBNZ stance. The IMF’s call for nimbleness underscores uncertainty around persistent inflation pressures.