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By James Glynn

  SYDNEY--Inflation pressures in New Zealand rose to their highest level since mid-2024 in the third quarter, curbing the central bank's ability to cut interest rates much further even as economic activity remains flat. 

  The consumer price index increased by 3.0% from year earlier, with the CPI up 1.0% over the quarter, Stats NZ said Monday. The annual increase followed a 2.7% annual rise in the prior quarter. 

  With inflation now back at the top of the Reserve Bank of New Zealand's 1% to 3% target band, the outlook for interest rates is more clouded. 

  The RBNZ delivered an emergency 50-basis-point cut in interest rates at the start of the month, reacting to a torrent of weak economic data that included a sharp contraction in economic growth in the second quarter. 

  Still, with inflation heating up, more cautious cuts are likely from here, according to economists. 

  The RBNZ has slashed interest rates hard over the last year, but the economy remains weak and unemployment is elevated. 

  The central bank has indicated that more cuts are coming. 

  Economic growth stalled in the second quarter, with national output contracting by 0.9% from the first quarter. Growth was flat in annual terms. 

  The largest contributors to the annual inflation rate in the third quarter were all in the housing and household utilities group, with electricity prices soaring by 11.3% and rents up 2.6%, the data showed. Local authority rates and payments were up 8.8%. 

  The annual increase in electricity prices was the largest since the first quarter of 1989 when they rose 12.8%. Still, the increase in rents was the smallest annual increase in over four years. 

  -Write to James Glynn at james.glynn@wsj.com 

  (END) Dow Jones Newswires

  October 19, 2025 18:32 ET (22:32 GMT)
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