The New Zealand dollar dipped to around $0.593 but remained on track for its strongest week since April 2025, following a hotter-than-expected CPI print. Annual inflation rose to 3.1% in Q4, above forecasts of 3%, exceeding the Reserve Bank’s target band and marking the highest reading since Q2 2024. While policymakers expect inflation to ease toward 2% this year, the strong data suggests the easing phase is likely over, raising the possibility of higher interest rates. Governor Anna Breman also signaled a more neutral stance on rates, declining to push back against market expectations for a hike this year, a shift from her earlier tone, when she had downplayed the likelihood of a near-term increase. Investors now price in an 80% chance of a rate hike by September, with roughly a 50% chance of a move in July. Elsewhere, ongoing weakness in the US dollar provided additional support to the kiwi.