Overview
- The Reserve Bank's Monetary Policy Committee raised the Official Cash Rate by 25 basis points to 2.75% on Wednesday and signalled at least one more 25bp increase toward roughly 3% by year-end, with future moves explicitly depending on incoming data.
- The committee said annual headline CPI rose to 4.1% in the June quarter largely because of higher fuel prices tied to the Middle East conflict, while CPI excluding vehicle fuels fell to 2.9% and most core measures sit inside the bank’s 1–3% target band.
- Although the vote was unanimous to hike, committee members were split on the balance of risks: four warned of upside pressure from persistent energy and petrochemical prices while two judged risks to be more balanced.
- Governor Breman stressed policy remains accommodative, the bank will take time to assess the effects of recent hikes, the upcoming election does not influence decisions, and markets reacted with a modest NZD depreciation and tighter lending costs.
- What to watch next: the RBNZ has two meetings left this year including an October decision just before the election, and further rate moves could tighten mortgage and business borrowing costs, weigh on household spending, and influence the pace of the uneven recovery.