Rampaging thief on the loose

<p>Kia ora,</p><p>Welcome to Monday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news financial markets, regulators and households worldwide are battling the lurking thief that is inflation. And regulators face a stark choice: inflation or recession?</p><p>The last time Stats NZ looked at our consumer inflation level it was as at March and it was running at 6.9% then. It is surely higher now. Our June rate won't be known until July 19. No analysts have yet forecast that level recently. <a href="https://www.rbnz.govt.nz/hub/publications/monetary-policy-statement/monetary-policy-statement-may-2022" target="_blank"><strong>The RBNZ's last MPS picked a 7% June rate</strong></a> (and lower after that) and that will clearly be way out. Our own <a href="https://www.interest.co.nz/charts/prices/grocery-prices" target="_blank"><strong>Grocery Price Monitor</strong></a>, a weekly series, suggests June 2022 quarter prices will be +12% higher than the equivalent level a year ago. However there is more to CPI inflation than just grocery prices.</p><p>There are plenty of things to blame, and partisan commentators are choosing them all. But the cost of energy is behind almost all the food, transportation and product price rises, so the most credible culprit, given when this scourge took off, is the 'Putin tax', out-weighing the pandemic effects, or even QE. Everything contributes in its own way but the war shock is the trigger.</p><p>How to fix the problem, one that steals from wallets and household budgets? If we can't stop the war on Ukraine, we have to quell demand significantly, so that price hikes don't stick. The problem is that this remedy hurts.</p><p>But we see it in action in China.</p><p><a href="http://www.stats.gov.cn/tjsj/zxfb/202206/t20220610_1857993.html" target="_blank"><strong>Chinese consumer prices</strong></a> were up just +2.1% in May from a year ag