Overview
- The Reserve Bank of New Zealand held the official cash rate at 2.25% on Wednesday after the Monetary Policy Committee split 3-3 and Governor Anna Breman used her casting vote to keep policy on hold.
- MPC member Hayley Gourley, who voted for a 25 basis-point hike at the meeting, said rates are expected to rise “sooner rather than later” and that July’s meeting will be shaped by data gathered in the weeks ahead.
- Assistant Governor Karen Silk warned that near-term inflation pressures are building, said the bank’s bias is toward rate increases at upcoming meetings, and said the RBNZ can act without waiting for the next quarterly CPI print.
- Officials pointed to external shocks such as the Middle East conflict and higher inflation among trading partners as having already hurt New Zealand’s inflation outlook and pushed the bank toward quicker action.
- The RBNZ’s new practice of publishing individual votes and encouraging members to speak has exposed internal differences, helped markets price further tightening toward a neutral OCR near 3%, and raised the prospect of higher borrowing costs for households and businesses.