Kiwibank economist says New Zealand inflation has peaked

The rising cost of living appears to have peaked, with Kiwibank's chief economist saying inflation will be closer to three percent by the end of the year.

The latest figures show annual inflation falling to 6.7 percent from just over 7 percent - a drop that was well below forecasts.

Kiwibank chief economist Jarrod Kerr said prices were in moving in the right direction, and by the end of the year inflation rate should be close to three percent.

"Inflation in New Zealand has peaked.

"I think that means that interest rates in New Zealand will also peak.

"And this time next year, we're going to see prices rising at a much lower clip, and maybe even, you know, a lowering of interest rates," Kerr told Checkpoint.

He said prices had started to drop internationally, with inflation pressures easing and the same can be expected for the domestic market.

Homeowners should start paying less for their mortgages by this time next year, Kerr estimated.

"We're already seen a peak in interest rates now. It's just a matter of when the Reserve Bank is able to turn around and start cutting rates and we think that that's a story for the end of this year."

He said the Reserve Bank did go too far in tightening of the interest rate to 5.5 percent.

"I've said any move beyond 5 percent is a step too far, and I think that will show up in future data."

Kerr said once inflation was between one and three percent, prices should stabilise.