The Reserve Bank of New Zealand (RBNZ) delivered a clear hawkish hold on Wednesday, keeping the Official Cash Rate (OCR) unchanged at 2.25% while strongly signalling that rate hikes are likely in the coming months.
The biggest surprise came from the updated OCR projections: the RBNZ now sees rates significantly higher through 2026 and 2027 than it did back in February, a sign policymakers are becoming increasingly concerned that inflation pressures linked to the Middle East conflict could prove more persistent
The statement repeatedly highlighted the risk that higher energy costs feed into wages, prices and inflation expectations, while the bank now expects inflation to peak at 4.3% later this year before only gradually returning to target by mid-2027. Furthermore, the Minutes reinforced the hawkish tone. The decision itself was split, with three members voting for a 25 basis point hike and three preferring to stay on hold, leaving Governor Anna Breman with the casting vote.
Still, the key point is that the disagreement was more about timing than direction. Breman later confirmed that all members broadly agreed rates are likely heading higher, with the debate centred on whether to move now or wait for more data. The RBNZ also acknowledged the difficult backdrop facing the economy.