New Zealand:
At its meeting on 2 September, the Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) by 25 basis points to 2.75%, its second consecutive hike following July’s increase and matching market expectations.
The Bank decision was aimed at taming inflation, which rose to 4.1% in the June quarter—well above the Bank’s 1–3.0% target band—due largely to higher energy costs. Moreover, the RBNZ anticipates that the economic recovery will “strengthen and broaden” going forward, providing the leeway to hike.
The Bank’s forward guidance was open-ended. This chimes with the views of our panelists; some see additional monetary tightening by end-2026, while some see rates on hold.
The Bank will reconvene on 28 October.
Panelist insight: On the outlook, Nomura analysts said:
“We think the RBNZ’s communication is consistent with our existing base case for a final 25bp rate hike in December (rather than October). This would appear to match the RBNZ’s stated desire to study the impact of the two rate hikes it has now delivered. This would also return the cash rate to a roughly neutral 3.0%. Underlying inflation appears contained, and there is material spare capacity in the New Zealand economy, so we continue to view a move into restrictive settings as not necessary.”
In contrast, EIU analysts see rates on hold:
“We consider this level [2.75%] to be broadly neutral and believe that the RBNZ will leave its policy rate here indefinitely.”