The annual inflation rate for 2025 was 3.1%, the latest Consumers Price Index data shows.

The 3.1% increase follows a 3% increase in the 12 months to the September 2025 quarter.

That puts the inflation rate outside the Reserve Bank of New Zealand’s target band of 1 to 3%.

“While the annual inflation rate has slowed considerably since its most recent peak of 7.3% in the June 2022 quarter, it has increased each quarter since the December 2024 quarter, when it was 2.2%,” prices and deflators spokesperson Nicola Growden said.

Inflation rose at 0.6% in the December quarter, with the largest contributors being the housing and household utilities group, which includes rates and power.

A series of positive economic data releases has bolstered expectations for growth in the year ahead.

But stubbornly high inflation could put pressure on the Reserve Bank to lift interest rates sooner than expected, economists say.

Expectations were for the rate to land at 3% or 3.1% – well above the Reserve Bank’s November pick of 2.7%.

Stronger headline inflation than the RBNZ had forecast was likely to keep the Monetary Policy Committee cautious, ANZ’s Workman said.

But there remained plenty of uncertainty about whether the RBNZ had done enough to deliver a sustained recovery.

“Recent data suggest the recovery has certainly got off to a strong start, but it’s early days.”

Liam Dann is business editor-at-large for the NZ Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.