Key insights
- New Zealand's Finance Minister warns that a prolonged Middle East conflict could worsen inflation due to supply chain disruptions. While this directly impacts New Zealand, it serves as a warning sign for global inflationary pressures, including potential indirect effects on the US economy through higher import costs and supply chain vulnerabilities.
Investing.com -- New Zealand’s Finance Minister Nicola Willis warned on Monday that inflation is likely to rise much higher this year and remain outside the central bank’s target range if the Middle East conflict continues.
The warning comes as the ongoing Middle East conflict threatens to disrupt global supply chains, with potential knock-on effects for commodity prices and shipping routes.
Willis said the latest Treasury department modelling shows inflation peaking higher than previously expected based on a scenario with "a longer conflict with deeper disruption to supply chains".
"They think inflation will go much higher this year, and it will stay out of our target band," Willis told reporters.
The Treasury’s updated modelling reflects concerns that a prolonged conflict could keep inflationary pressures elevated beyond current forecasts.
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