Wellington: The Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate (OCR) by 25 basis points to 2.75% on Wednesday, marking its second consecutive rate increase. This move is aimed at bringing inflation back to its 2% target while simultaneously supporting economic growth and employment.
According to Qatar News Agency, the decision was made unanimously by the Monetary Policy Committee and was largely in line with market expectations. The RBNZ emphasized that the gradual removal of monetary stimulus is appropriate to ensure inflation returns sustainably to the 2% target midpoint, while avoiding unnecessary instability in output, employment, interest rates, and the exchange rate.
Annual consumer price inflation climbed to 4.1% in the June 2026 quarter, primarily due to higher fuel and related prices stemming from the conflict in the Middle East. Nonetheless, most measures of core inflation, expected wage growth, and longer-term inflation expectations align with inflation returning to the RBNZ's 1%-3% target band by mid-2027 and reaching the 2% midpoint later in the year.
The central bank reported that New Zealand's economic recovery likely resumed following lackluster growth in the second quarter, though the recovery remains uneven across different sectors and regions. Resilient demand from trading partners and strong export prices are contributing to income growth and investment in sectors exposed to exports.
The RBNZ anticipates that the recovery will strengthen and broaden, with export activity maintaining resilience, household spending gradually increasing, and labor-market conditions improving as the recovery progresses.
The Monetary Policy Committee indicated that future decisions would be contingent on its assessment of risks to medium-term inflation. It noted that the OCR might need further increases depending on the economic outlook and emphasized its vigilance regarding the risk of inflation proving more persistent than expected.