An independent economist says the Reserve Bank (RBNZ) is in a "sweet spot" when it comes to New Zealand's current inflation situation.
It comes as experts predict the central bank will likely pause interest rate increases when the monetary policy committee meets on Wednesday.
New Zealand's rate of inflation is currently running at 6.7 percent. That's fallen from its peak of 7.3 percent, in large part due to the RBNZ aggressively pushing up the official cash rate (OCR) from 0.25 percent in August 2021 to its current 5.5 percent level
However, the cash rate was widely predicted to remain at 5.5 percent on Wednesday - marking its first pause in nearly two years.
Independent economist Cameron Bagrie told AM the RBNZ's tightening seemed to have done the job.
"They're in quite a sweet spot compared to other central banks around the globe," Bagrie said of the RBNZ.
"The New Zealand economy has turned pretty aggressively in 2023. If you look at the tax numbers, the tax numbers are saying businesses are not making money… we know the job losses are going to start to mount and that's just further evidence that we've got a weaker economy."
Bagrie said the RBNZ went hard and early on OCR hikes to tackle inflation.
"When you go earlier, you get into that sweet spot a tad earlier than other countries around the globe. They noted in May there was a high bar to hiking again so they're going to sit back, and they're going to wait and hope that inflation tracks down as projected."
He said, however, central banks around the world were struggling to bring inflation under control - impacting the global economy.
Bagrie said this had resulted in some central banks that had paused interest rate hikes having to restart them. Canada's central bank, for example, was expected to hike rates by 25 basis points this week - despite thinking they had peaked earlier this year.
"Some central banks, including the Bank of Canada, hoped earlier this year they were done [with hikes] - the economic data and inflation proved otherwise," Bagrie said.
"What we know is, inflation is still a problem. Yes, headline inflation is coming down but if you strip out energy, you strip out food - core inflation generally speaking, around the globe, is sitting around 5 to 5.5 percent."
Major New Zealand banks including ASB, ANZ, Westpac and Kiwibank were all forecasting an OCR pause on Wednesday.
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