ANZ has warned that it expects inflation will hit 7.4 percent in the second quarter, but it wasn't long ago that news it had reached 5.9 percent set alarm bells ringing.
Given that 5.9 percent mark was a 30-year high, what's going on - will it soar another 1.5 percent and what will that mean for you?
RNZ is here to help clear it up.
What's inflation again?
Just in case, here's how the Reserve Bank of New Zealand describes inflation: "(It) is the term used to describe a rise of average prices through the economy. It means that money is losing its value".
Is it possible inflation will hit that 7.4 percent mark?
Infometrics principal economist Brad Olsen says it "absolutely" is.
"The position that we find ourselves in in at the moment (or) at the end of 2021 at least was the highest inflation figure we'd had for 32 years …
"The feeling from the Reserve Bank in recent weeks was that inflation could head towards 6.6 percent at the start of 2022. Of course that was all before Ukraine was invaded by Russia.
"So now what you've seen since the Russian invasion is a huge move upwards in a number of commodity prices and what that's going to do is continue to push up the price for New Zealand consumers in a range of ways."
Have we ever had inflation as high as 7.4 percent?
"We are seeing, you know, once in a generation inflationary pressures that we've just not encountered for three decades," Olsen says.
"The highest rate we've got before the 5.9 that we're seeing at the moment is 7.6 percent in the June 1990 quarter.
"So ANZ's pick of 7.4 would come in just below that."
But Olsen says it's possible it could go higher than 7.6 percent.
"If it goes above that, the next highest that we have on record is a 9 percent annual increase recorded in the March 1988 quarter.
"If you get into inflation in the 80s, and that's we were starting to compare ourselves to, we need to be flashing some serious alarm bells because the period before the 1990s had some decades with some intensely high inflation that was incredibly destabilising to the New Zealand economy and incredibly harmful to New Zealand households and, and that's certainly not a position we want to find ourselves in."
So what is driving this?
First and foremost, fuel prices, Olsen says.
That effect is already being seen at the pump.
"You'll continue to see it reflected at the pump given this international oil prices are now sitting at about US$130 a barrel, which you know could well push the cost of 91 fuel to well over $3 - sort of more around sort of $3.10 to $3.30 depending on where oil prices settle out."
That has a flow-on effect - if it's expensive for motorists it's expensive for transport companies, too.
And that means: "They are going to be having to increase their prices even further as you go.
"They fill up their trucks trying to move food to the supermarkets and so on, so that's going to continue to push the price of other goods and services up.
"Grain and wheat and similar coming out of Eastern Europe is going to be heavily constrained. The likes of Ukraine and Russia combined provide about 75 percent of the sunflower oil that's exported around the world. There's some of the heavy precious metals, nickel and copper and similar that are being affected.
Olsen says what we're seeing now is an already heavily disrupted, heavily fractured global supply system being further battered by the Russian invasion and "huge" levels of geopolitical tension.
ANZ, forecasting the jump to 7.4 percent, also says the events in Ukraine are reverberating around the world.
"On the economics side, New Zealand's biggest exposure to the crisis is largely through the price channel.
"Commodity prices have been rising steadily over the past year as rising global demand struggled against Covid disruption, but with the outbreak of war and implementation of sanctions against Russia, those increases have turned vertical."
It says futures prices for key commodities have also surged.
"As a small open economy, New Zealand is exposed to global fluctuations in commodity prices." The most obvious being fuel, as mentioned by Olsen.
Back in February, when the Reserve Bank raised the Official Cash Rate by 25 basis points to 1 percent, its governor Adrian Orr said much of inflation was being driven by forces outside of New Zealand's control.
Orr said oil prices had been the most notable driver of inflation pressures for New Zealand, but added that tradable or imported inflation was far more widespread than just oil prices.
"The global economy continues to struggle to supply sufficient goods and services to meet the strong ongoing demand, from both the catch-up of the demand running ahead of supply and the ongoing supply into the future.
"The degree of inflationary pressure experienced across economies has, to some extent, depended on the different starting points and experiences heading into the pandemic.
"Most of our advanced economy trading partners have experienced a long period of very subdued consumer price inflation and persistently high unemployment."
So is this all on Russia's invasion of Ukraine?
Even before that, people were look at the Reserve Bank's inflation forecast of 6.6 percent and thinking "gosh, it probably could go higher than that still, there seems to be a lot of pressure underneath it", Olsen says.
"Something like 7.4 percent or to be honest, possibly a touch further, is certainly not outside the realms of possibility.
"More importantly, I think what you've got here is that prices will stay higher for longer because we're not expecting that the Russian invasion ends overnight and the world returns immediately back to normal.
"This is a long lasting issue that will have long lasting implications for the economy."
Will inflation stay high?
We could certainly see inflation staying above 7 percent, Olsen says.
That's because what's being observed - and is reflected in the latest ANZ Business Outlook Survey - is that businesses are looking to and intending to continue increasing prices this year, Olsen says.
"And they are having to increase them more often. they're having to increase them in larger groups, and they're often wanting to increase them ahead of their own costs going up so that they're not caught short if their suppliers say 'Look I've got, I've got to charge you a bit more'.
"What that is demonstrating to us is that New Zealand businesses now have the least level of pricing discipline, if you will, in a generation, because people are, businesses are, not being quite as resistant to price changes.
"In fact, everyone seems to be getting giddy at putting up prices."
That has them worried, Olsen says.
That worry is that consumers are looking at steep inflation and a tight labour market then going to their employer for a pay rise.
"If you do start to see quite a persistent level of higher wage increases, which is likely this year, and businesses are not being as disciplined when it comes to price increases themselves, you could well have that sort of wage price spiral where the increase in wages means that businesses have to pay for those increased wages with higher costs again.
"So you can see that vicious circle sort of going upwards and upwards."
It means there's a real risk that inflation will stay higher for longer, Olsen says.
What's the response to this?
Inflation at this level hasn't been seen for so long and at least for the past decade, the country has actually been trying to figure out how to provide a slightly higher level of inflation because it's been at relatively low levels, Olsen says.
Which is why the Reserve Bank has been cutting the official cash rate.
Infometrics has been saying since November that the OCR needs to go up by 50 basis points.
"We've made some pretty forthright comments there about the the speed - or lack thereof - from the Reserve Bank and actually starting to raise those interest rates because at the moment, given where inflation is given, where interest rates are, those interest rates are still very stimulatory.
"We're currently still trying to pour more fuel onto the fire and we've already gotten out of control inferno when it comes to inflation, yet we continue to push more, we continue to try and pump more and more money into the economy.
"What we're seeing is that the New Zealand economy is really starting to hit some of those capacity limits."
Infometrics has been expecting that the OCR will need to be lifted by at least 50 basis points, as mentioned before.
"Obviously ANZ's gone further than that now and called for a double up of 50 basis point increases over the next two meetings. We would certainly be on board with that."
Regardless, action to get it under control needs to be prompt, he says.
"Because talking to households, talking to businesses across the country, there is a feeling that there is no control yet over inflation - that it is going higher and it seems to be without anyone taking it to task."
What's the risk?
The country could spend a period with high inflation while being unable to grow the economy much further - otherwise known as stagflation.
There are increased prices to goods across the board.
Then there's housing.
With interest rates expected to go up, the market will get tougher.
"That is why you're starting to see a bit of a shift in the market - sellers still wanting a certain amount of money, but buyers saying 'look at these higher interest rates, banks won't lend me all that much so I can't pay your high prices' ... which is why you are starting to see a bit more moderation.
"Of course, those higher interest rates as well mean that people who have bought recently and really stretched themselves to the extreme to get on the housing ladder and get a mortgage and now starting to pay some pretty serious increases are on some pretty large loans, which is certainly going to be stressing some households out."
Mortgage servicing is already continuing to get harder.
Last month, CoreLogic said 48 percent of gross household income was now required service an 80-percent loan-to-value ratio mortgage, based on the average property value, with the mortgage over a 25-year term.
It is up from 42 percent three months ago, and 33 percent in the final quarter of 2020.
The record was 50 percent just prior to the global financial crisis from 2007 to 2008.
Meanwhile, consumer confidence has plummeted.
The ANZ-Roy Morgan Consumer Confidence Index for February fell 16 points on the previous survey in December to 81.7 - which is the lowest reading since ANZ began collecting data in 2004.
A net 21 percent of respondents thought it was as a "terrible" time to buy major household items, which is a key indicator of consumer confidence.
But another concern is an expectation shift. For example - people starting to expect inflation to be higher for longer, Olsen says.
That's because in economics, expectations "very much lead into reality", he says.
If you expect things will keep getting expensive, you might go out and buy a bit more of it now before the price goes up, Olsen says.
"And by doing that, you actually continue to push the price up."
A good example is the fuel market, he says.
"So you do very much risk what economists talk about - the decoupling of those expectations around what inflation is and what it's likely to be going forward.
"If that happens, that's where you're likely to get even more persistent inflation."
That just reinforces that we need to "take the inflation beast quite seriously and nip it in the bud as quickly as possible", Olsen says.
"Because if you allow it to get entrenched, it is very, very hard to move away from and extract yourself from those higher inflationary pressures."
There's no comfortable or easy way out, he says.
What's the worst case scenario here?
Olsen thinks worst case scenario would be inflation sitting at over 7 percent per annum for a longer period.
"You could well see, at this point I think ,unless we take some quite serious steps to combat inflation. And if that's the case, then there is certainly a real challenge on for households who're going to continue to see those price increases remaining considerably higher, making it increasingly difficult to make a household budget work.
"The current generation of New Zealanders hasn't really experienced this level of inflation, so it is quite a different beast, because we haven't had that experience.
"Something you get a feeling of across the country is that that feeling of wanting to try and create some more stability and people are looking for opportunities to try and reduce just how much money they're spending because it is hitting them in the pocket so hard.
"So inflation is not just a fun number that economists talk about in the news. It is a real critical issue and it is affecting peoples' costs of living very directly and something that households, after a long period of not having to worry as much about, is now front and centre for many kiwis."