New Zealand Interest Rate

Central Bank hikes rates in July

RBNZ delivers first rate hike in over three years: At its meeting on 8 July, the Reserve Bank of New Zealand (RBNZ) decided to raise the Official Cash Rate (OCR) by 25 basis points to 2.50%, following a prolonged hold since November 2025. The move, which was in line with market expectations, marked the first rate hike since May 2023.

Above-target inflation forecasts drive hike: The Bank raised its key policy rate in an effort to steer inflation back to target. While near-term price pressures eased following the partial reopening of the Strait of Hormuz, the RBNZ warned that the shock's lingering effects leave the medium-term inflation outlook highly uncertain. Meanwhile, economic growth lost some momentum due to the oil shock, but it is projected to remain robust over the medium term as supply disruptions fade and confidence rebounds. Ultimately, persistent above-target inflation forecasts paired with resilient growth prospects drove the decision to hike.

Further hikes likely later this year: The Bank hinted that further hikes remain on the table for this year. Most of our panelists expect the RBNZ to tighten its monetary stance before the end of this year, while a minority expects it to hold. The Bank will reconvene on 2 September.

Panelist insight: On the outlook, ANZ analysts said: “We continue to expect hikes at the next two meetings, in early September and late October, taking the OCR to 3%, as the economic upswing becomes more established.” Goldman Sachs analysts commented: “Looking ahead, we lean towards another 25bp rate hike in September to 2.75%, given the MPC still judges policy to be accommodative and that the MPC on aggregate assesses inflation risks as skewed slightly to the upside. Over the medium term, however, we continue to expect the RBNZ to remain on hold at 2.75% as existing spare capacity in the New Zealand economy limits the indirect effects of the oil price shock and inflation undershoots the RBNZ's forecasts.”

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