Economic Buzz: New Zealand central bank leaves Official Cash Rate unchanged at 2.25%

The Reserve Bank (RBNZ) has held the official cash rate (OCR) unchanged at 2.25 percent in a split vote, but warned it will have to raise to counter surging inflation caused by the Middle East conflict.

The MPC said getting inflation back into the 1-3 percent target zone remained its priority and higher interest rates would be needed to achieve that this year.

The pace of OCR increases will depend on the relative influence of persistent wage- and price-setting behaviour versus weaker economic activity on medium-term inflation pressures.

An indicative interest rate track pointed to a likely OCR rise in September to 2.5 percent and a further 25 basis point rise, and a further rise in early 2027 before a couple more increases over the following 12 months.

Inflation was forecast to hit 4.3 percent in the September quarter, before returning to the target band by the middle of next year.

But the MPC said there was much uncertainty but generally conditions would be weaker in the near term.

Powered by Commodity Insights