BNZ’s chief economist Mike Jones says Treasury’s previous worst-case inflation forecast for this year of 3.7% is probably too conservative. 

Annual food costs climbed 4.5% in the year to February but Jones told Ryan Bridge BNZ's 2.9% consumer price index forecast for the first quarter hadn’t changed. 

“It's the second quarter that's really going to bear the brunt of the spike in petrol prices that we are seeing. So we've got a 3.8% forecast for Q2 and inflation stays above 3% now for the rest of the year on our numbers.” 

Finance Minister Nicola Willis on Monday said Treasury had given her a worst-case scenario of 3.7% inflation by the end of the year, assuming a long conflict in Iran - up from the current 3.1%. 

But Jones said that could now be “a bit light” - though he did not believe inflation would go above 4%. 

“Of course, we've probably had the benefit of a few more days and maybe even a week of information and what we've seen in the current environment is that forecasts and assumptions are going out of date pretty quickly.” 

LISTEN ABOVE