Reserve Bank of New Zealand raises the cash rate to 2.75 per cent
The Reserve Bank of New Zealand raised its Official Cash Rate by 25 basis points to 2.75 per cent on Wednesday, a second straight increase after July. The Monetary Policy Committee decided by consensus after June-quarter inflation reached 4.1 per cent, above the bank's 3.9 per cent projection. Governor Anna Breman said a future OCR increase is likely but the timing is highly uncertain. The cash-rate track was 2.81 per cent in December and 3.15 per cent by the end of 2027.
Economics & Markets··Midday
The Reserve Bank of New Zealand lifts the rate to 2.75 per cent
The Reserve Bank of New Zealand raised its Official Cash Rate by 25 basis points to 2.75 per cent on Wednesday. interest.co.nz wrote that this was a second straight increase after a same-sized move in July. The Business Times reported that the move came at a second straight meeting and was widely anticipated by markets and economists. The six-member Monetary Policy Committee reached the decision by consensus. The committee said gradually removing monetary stimulus is appropriate to return inflation to the 2 per cent target mid-point while supporting growth and employment. The Business Times wrote that the July increase was the first in more than three years and that Wednesday's quarter-point step still leaves the cash rate well below the 5.50 per cent peak reached in August 2024.[1], [2]
New Zealand's June-quarter inflation at 4.1 per cent overshoots the 3.9 per cent projection
The Reserve Bank of New Zealand said gradually removing monetary stimulus is necessary to return inflation to target after annual inflation reached 4.1 per cent in the June quarter, above the bank's own projection of 3.9 per cent. Core inflation excluding vehicle fuels was 2.9 per cent. The committee's projections have inflation returning to the 1–3 per cent target band by mid-2027 and to the 2 per cent midpoint later that year. It said the future path of the cash rate is not pre-determined. The Business Times wrote that the bank is seeking to steer inflation back to target without choking off an economy that is beginning to regain momentum, and that future policy decisions will depend on the committee's judgement of the balance of risks to medium-term inflation.[1], [2]
Breman leaves the timing uncertain as the kiwi slides to 0.5829 dollars
Anna Breman told a press conference, as reported by The Business Times, that a future OCR increase is likely but the timing is highly uncertain. The Reserve Bank of New Zealand's cash-rate track was little changed, with future rates projected at 2.81 per cent in December and 3.15 per cent by the end of 2027. Markets had priced in a faster pace of moves and a top around 3.5 per cent. The Business Times wrote that two-year swap rates fell 5 basis points to 3.6775 per cent and the kiwi dollar slid 1 per cent to 0.5829 US dollars, on top of a 0.4 per cent drop overnight. interest.co.nz reported that the committee described June-quarter growth as lacklustre and noted that employment growth has not been enough to absorb new entrants to the labour market.[1], [2]
