NZIER shadow board recommends no change to New Zealand’s OCR this week but signals future hikes as inflation pressures build.
New Zealand’s Reserve Bank is likely to keep its Official Cash Rate at 2.25% this week, according to a majority of the NZIER Monetary Policy Shadow Board. The recommendation follows weak GDP growth of 0.2% last quarter and rising unemployment, nearing 5.6%, alongside supply-driven oil price shocks and geopolitical uncertainty tied to the US-Israel conflict with Iran.
While most members support a hold, three advocate for immediate tightening, citing prolonged low or negative real interest rates and mounting inflation risks. All agree the OCR should rise over the next year, with projections clustering between 2.75% and 3.75%. Hawks warn delaying action could entrench low real rates and fuel second-round inflation effects.
The division highlights tension between subdued domestic demand and persistent inflation pressures, with external risks adding to policy caution.