A leading economist has a grim outlook for inflation over the rest of the year saying "it's not going away soon" and could result in Kiwis paying more for their mortgages.
It comes after the Consumer Price Index (CPI) figures released by StatsNZ in January showed the biggest annual inflation jump in three decades.
Annual price inflation (the difference between the December 2020 quarter and the December 2021 quarter), hit 5.9 percent, up from 4.9 percent in the previous (September) quarter.
Brad Olsen from Infometrics told AM on Wednesday that Kiwis should be prepared for inflation to get worse, not better.
"That expectation is absolutely true, we know that ANZ came out yesterday with a 7.4 percent inflation expectation and with the Russia-Ukraine situation at the moment, you could well see that go further," Olsen said.
"The uncomfortable situation is that the Reserve Bank will have to raise interest rates, they will have to raise them considerably and at a very fast pace to try to get a bit of that demand under control and to say to people look, there is a need for you to cut back on spending in other areas."
Olsen said the Reserve Bank makes the tough choices not "politically nice decisions" and it will be an "uncomfortable" situation for households as they might have to pay more for their mortgages.
"You will have to pay a bit more towards your mortgage because there isn't all that much economic capacity to go around and we need to limit back some of that pressure the economy is facing," he told AM.
"But that is a very uncomfortable position because it will be saying to households, you will have to pay a bit more for your mortgage, which leaves less money in other areas when we already have inflation going higher and we know that economic activity is set to slow and remain more limited this year.
"So a very difficult set of circumstances but important to remember this is why the Reserve Bank is independent.
"They don't make the politically nice decision, they make the tough decision that is in the best interest of the country overall and you would hope that would over time tame inflation.
"But let's be real, inflation isn't going away soon and it's not going to be an easy path forward."
On Monday, Prime Minister Jacinda Ardern acknowledged many Kiwis were finding it tough but said inflation is predicted to ease over the coming year.
"Yes these times are tough, we have seen the impact of inflation, but we have also seen people predict we'll be coming out of that throughout this year. Things will start to get better and ease," she told AM on Monday.
Ardern told AM that she doesn't believe the rising cost of living is a crisis.
"I wouldn't describe it that way, there is an impact that people are feeling undeniably but I wouldn't describe it in that way," she said.
It comes as the cost of living skyrockets with Kiwis spending on average an extra $4000 and $5000 in the past 12 months on basics such as food, rent and fuel. The majority of the increase is fuel with an extra $678 a year at the pump on average.