At the end of 2023, the Reserve Bank of New Zealand (RBNZ) faced intense scrutiny as it sought to bring annual inflation back within its target band of 1% to 3%. A combination of domestic capacity constraints and elevated global commodity prices kept price pressures elevated throughout the year.
Between December 2022 and December 2023, New Zealand's Consumer Price Index (CPI) climbed from 115.0 to 122.13. This sustained rise led financial markets to price in further hikes to the Official Cash Rate (OCR) to prevent inflation expectations from becoming unanchored.
Over the same period, the government's net debt-to-GDP ratio rose to 38.5%, prompting discussions about fiscal consolidation and the sustainable funding of infrastructure projects.
Using information from the stimulus material, calculate New Zealand's 12-month inflation rate in December 2023.
