New Zealand Raises Official Cash Rate for Second Straight Meeting

The Reserve Bank of New Zealand (RBNZ) lifted the Official Cash Rate (OCR) by a quarter-percentage point to 2.75%, marking a second consecutive increase. The move targets rising price pressures, with headline inflation accelerating to 4.1% in the second quarter and core inflation holding at 2.7%, both above the 1-3% target band. The RBNZ’s latest forecasts project inflation easing to 3.9% in the third quarter and returning to the 2% midpoint of the target range in early 2028.

Bloomberg

Forward guidance shows the average OCR expected to reach 2.81% in the fourth quarter, slightly below the 2.84% projected in May, and to climb to 3.07% by mid-2027. Market pricing indicates a 95% probability that the recent hike will be followed by another 25-basis-point move, while the chance of an October increase is priced at roughly 70%. Economists note the RBNZ aims for a neutral rate of 3% or higher, but view the timing of further hikes as uncertain.

Bloomberg

The rate hikes arrive two months before the upcoming general election, posing a potential challenge for Prime Minister Christopher Luxon and his centre-right coalition, which is lagging in opinion polls. The opposition Labour Party has pledged a dual mandate of price stability and maximum employment if it assumes power.

Bloomberg

Governor Anna Breman told reporters that a further OCR increase is likely, but the timing remains “highly uncertain” as the committee assesses the impact of the two recent hikes and new data. The RBNZ reiterated its resolve to adjust the OCR upward, while noting that the next two meetings—one nine days before the election—will depend on medium-term inflation risks. Government officials highlighted the export-led recovery and cautioned that most mortgages are fixed-rate, limiting immediate consumer impact.

Bloomberg

• “It’s likely that there will be a further increase in the OCR,” — Governor Anna Breman

Bloomberg

• “The RBNZ remains resolved to adjust the OCR higher, but for now that looks more like a discussion for December as opposed to a discussion that will necessarily occur in both October and December,” — Kelly Eckhold, chief New Zealand economist at Westpac in Auckland

Bloomberg

• “Unlike some previous upturns, this recovery is being driven by the export sector rather than rising house prices,” — Finance Minster Nicola Willis

Bloomberg

• “It makes sense for the RBNZ to continue along the path of getting the OCR back closer to neutral in the face of upside risks to inflation and a starting point north of the target band,” — Sharon Zollner, chief New Zealand economist at ANZ Bank in Auckland

Bloomberg

• “We see the RBNZ being equivocal about the potential for an October OCR increase,” — Kelly Eckhold, chief New Zealand economist at Westpac in Auckland

Bloomberg

• “We are a little more circumspect on the outlook given the mixed run of data and the lack of obvious growth drivers,” — Mark Smith, senior economist at ASB Bank in Auckland

Bloomberg