The Reserve Bank of New Zealand raised its cash rate by 25 bps to 2.75%, delivering a second straight hike after an increase in July and in line with expectations. The decision reflects the need to gradually remove monetary stimulus and bring inflation back to the 2% target midpoint while supporting growth and employment. Annual inflation rose to 4.1% in Q2 2026, largely due to higher fuel prices stemming from the Middle East conflict. However, core inflation, wage growth and inflation expectations remain consistent with inflation returning to the 1-3% target band by mid-2027. The economy has likely resumed its recovery after lacklustre growth in Q2, supported by resilient external demand, export prices and investment in export-oriented sectors. Still, weak income growth, job insecurity and flat house prices weigh on household spending and residential investment. The Committee expects the recovery to strengthen and broaden but remains alert to risks of more persistent inflation.

Asian equity markets fell sharply on Wednesday, tracking Wall Street lower as a surge oil prices heightened concerns over inflation and imminent interest rate hikes. Global bond yields also rallied on mounting inflation worries, expectations of monetary tightening and worsening fiscal conditions, pressuring equities further. Tech-heavy indexes in South Korea and Japan dropped about 3%, leading regional declines. Shares in Australia, China and Hong Kong also slumped.

Japan’s 10-year government bond yield climbed above 3% on Wednesday, reaching its highest level since 1996 as surging oil prices heightened inflation concerns and strengthened expectations for imminent interest rate hikes. Japan’s deteriorating fiscal outlook, amid the Takaichi administration’s plans for massive spending and tax cuts, also fueled the surge in domestic bond yields. Oil prices advanced for a third consecutive session amid escalating hostilities between the US and Iran, raising concerns over further disruptions to energy flows from the Middle East. Higher energy costs exacerbate import-driven inflation in Japan given its reliance on oil imports. Meanwhile, the Bank of Japan is increasingly expected to raise interest rates this month, with US Treasury Secretary Scott Bessent urging BOJ Governor Kazuo Ueda to take “decisive” monetary steps to combat yen weakness.

Gold fell to around $4,300 an ounce on Wednesday, sliding for the fourth straight session to the lowest in over three weeks, as investors assessed the prospects of Federal Reserve interest rate hikes following a sharp rise in global bond yields and oil prices. Global bond yields climbed amid mounting inflationary pressures and growing expectations of imminent rate hikes, with US Treasury yields reversing the decline triggered by Secretary Scott Bessent’s announcement of an expanded buyback program. Fed Chair Kevin Warsh’s pledge to combat inflation further reinforced the hawkish outlook, with markets now pricing in around a 70% chance of a Fed rate hike this month. Attention now turns to the ADP employment report due Wednesday and Friday’s nonfarm payrolls for further clues on the Fed’s policy path. Meanwhile, oil prices extended gains amid escalating hostilities between the US and Iran, further heightening inflation risks.

Crude oil climbed toward $91 per barrel on Wednesday, rising for a third consecutive session to its highest level in nearly six weeks as escalating hostilities between the US and Iran heightened concerns over further disruptions to energy flows from the Middle East. The US military launched fresh strikes against Iranian targets around the Strait of Hormuz, which President Donald Trump said were retaliation for Tehran’s attempts to lay mines in the waterway and for an earlier attack on a US military base. Trump also threatened a significantly larger response should Tehran retaliate. Iran said it had already responded by targeting US bases in the region and firing missiles toward Jordan. Meanwhile, US Treasury Secretary Scott Bessent said Iran’s bankruptcy is in the “acceleration phase,” while noting that 17 million barrels of crude passed through Hormuz on Monday, suggesting Tehran does not have control of the strategic waterway.

South Korea’s annual inflation rate rose to 3.1% in August 2026 from 2.8% in July, moving further above the central bank’s 2% target but below market expectations of 3.2%. The increase was largely driven by a one-off factor of low-base effect from temporary mobile-service discounts last year, with mobile service fees surging 26.7% year-on-year and lifting public-service prices by 6.5%. Petroleum prices also remained elevated, rising 14.2%, although slower than the 15.5% increase in July. Excluding the temporary impact of mobile fees, inflation would have been around 2.5%, according to the Finance Ministry, while nationwide fuel-price caps reduced the headline rate by 0.3 percentage points. Meanwhile, core inflation, excluding food and energy, accelerated sharply to 3.4% from 2.6%, marking its fastest annual increase since May 2023. On a monthly basis, consumer prices rose by 0.2% in August, falling short of market estimates for a 0.3% gain but rebounding from a 0.2% decline in July.