RBNZ lifts OCR by 25 basis points, citing lingering inflation risks and a potential feedback loop from currency weakness.
The Reserve Bank of New Zealand increased its official cash rate by 25 basis points to 2.50%, matching market expectations but reinforcing a tightening bias. The decision was unanimous, though committee members split on inflation risk balance, with two seeing upside skew and four viewing risks as balanced.
Annual headline inflation is projected to peak at 3.9% in June before easing to target by mid-2027. Falling oil prices have tempered near-term pressures, but the RBNZ warned that Middle East shocks and a weaker currency could sustain inflationary risks. The bank also confirmed its LSAP unwind will complete by June 2027, removing balance sheet uncertainty.
The RBNZ’s guidance on further hikes and currency feedback loops may fuel volatility in rate markets, though timing remains uncertain.