ASB senior economist Mark Smith said the inflation figures were “much, much stronger” than the bank had expected. He said it was driven by “the perfect storm of rising costs, stretched capacity and demand-side pressures”. 
Inflation is a term used to describe the rise of average prices. It essentially means that money is losing its value, and the underlying cause is usually that too much money is available to purchase too few goods and services, with demand outpacing supply. 
The blame has been pointed at the Reserve Bank, which has been doing what’s described as ‘money printing’ throughout the COVID-19 pandemic, to stimulate the economy through what’s been a global economic slump. 
The Reserve Bank’s economic stimulus has gone hand-in-hand with record low interest rates, which is partly to blame for the meteoric 30 percent annual rise in house prices. 
On Wednesday, the Reserve Bank agreed to reduce economic stimulus by winding up its programme of bond buying, or ‘money printing’. But, it kept the official cash rate, or interest rates, at the current 0.25 percent.
Smith expects this to change in the coming months, because despite many countries across the globe struggling economically due to COVID-19, New Zealand’s lack of the virus has allowed us to prosper.