Divided RBNZ keeps the OCR on hold
The Reserve Bank is projecting its official cash rate (OCR) will probably rise to 2.5% in the September quarter, although there's still a chance of an earlier hike.
Wednesday, May 27th 2026, 4:21PM
by Jenny Ruth
RBNZ has kept the OCR at 2.25%.
The central bank now expects the OCR to peak at 3.3% by the December quarter of 2028 and to remain there through to the June quarter of 2029, the end of its forecasting period.
RBNZ expects the Consumers Price Index (CPI) to come in at 4.2% for the year ending June, the same forecast it made last month for the June quarter, and to peak at 4.3% in the September quarter, to drop below 3% by the June quarter of 2027 before subsiding back to 2% by the September quarter of 2027.
RBNZ's target is the midpoint of of 1% and 3%.
However, BNZ head of research Stephen Toplis thinks the OCR will go higher than the current RBNZ projections.
Toplis says RBNZ had wanted to keep rates on hold but the rest of the monetary policy committee (MPC) didn't but that they all agreed that rates will need to rise and to rise soon.
“On this basis, we bring forward our first rate hike to July with rate increases now pencilled in for every meeting until we reach the peak of 4%, that we have long been touting, in May 2027.”
The minutes of the MPC showed governor Anna Breman, chief economist Paul Conway and assistant governor Karen Silk wanted to hold the OCR at 2.25% while the three external MPC members, Carl Hansen, Hayley Gourley and Prasanna Gai, would have preferred to have hiked the OCR to 2.5% today.
Breman used her casting vote to keep the OCR on hold.
RBNZ's projections include that the economy will not grow at all in the current quarter before eking out 0.2% growth in the September quarter and 0.5% in the December quarter of this year.
It has economic growth peaking at 1% in each of the September and December quarters of 2027.
In February, RBNZ had expected the economy would have growth 0.5% in the June quarter and 0.6% in each of the September and December quarters.
The projections show the unemployment rate peaking at 5.4% in the June quarter and remaining there through to the June quarter of next year before falling to 5.1% through the second half of 2027 and 4.9% in the March quarter of 2028.
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