RBNZ Holds Rate at 2.25%, Signals Faster Hikes as Energy Shock Lifts Inflation to 4.3%
Updated
Updated · Reuters · May 27
RBNZ Holds Rate at 2.25%, Signals Faster Hikes as Energy Shock Lifts Inflation to 4.3%
6 articles · Updated · Reuters · May 27
New Zealand's central bank kept the OCR at 2.25% in a 3-3 split, with Governor Anna Breman casting the first tie-breaking vote since the committee's 2019 creation.
The RBNZ said rates will likely rise sooner and by more than it projected in February as war-driven oil disruptions worsen the inflation outlook and keep price pressures elevated.
Markets quickly shifted to a tighter path: the kiwi rose 0.6% to $0.5871, two-year swaps climbed 5 basis points to 3.51%, and traders raised the odds of a July hike to 73%.
Updated forecasts show inflation peaking at 4.3% in the September quarter, while the terminal rate was lifted to 3.28% even as unemployment is seen near 5.4% and growth stays weak.
The decision highlights the RBNZ's balancing act after 325 basis points of cuts since August 2024, with Middle East conflict and a tight New Zealand budget stance now squeezing an economy only just out of recession.
Can New Zealand's central bank fight soaring inflation without crushing its already weak economy?
What does a rare tie-breaking vote reveal about the new leadership of New Zealand's central bank?