Monetary Policy Statement February 2025

Inflation remained at 2.2% in the last 3 months of 2024

Tradables inflation has stayed low because of low inflation overseas. However, petrol prices have gone up recently.

Non-tradables inflation is also falling but is still higher than usual. Council rates, rents, and insurance are all contributing to inflation. The weak economy means non-tradables inflation will keep coming back to normal levels.

We expect inflation to stay in our target range. Inflation may go up temporarily this year, partly due to higher petrol prices.

Economic activity has been weak, but we expect it to improve over this year

Businesses have been seeing less demand for their products. Households have also been spending less than usual.

However, there are signs of economic recovery. Lower interest rates will encourage households to spend more and businesses to invest, but this may take some time.

A lower exchange rate and higher prices for dairy and beef are supporting New Zealand firms who sell their products overseas.

Unemployment has increased, but businesses will hire more as the economy improves

We expect unemployment to start coming down later this year as the economy recovers and businesses hire more. 

Pay rises are likely to be smaller than in recent years, because of the tough jobs market and low inflation.