Two quarter-point hikes are now the RBNZ’s minimum projection for 2026, even with unemployment expected to stay at 5.4% for at least another year.
Inflation is driving that stance: the bank expects the Iran war’s energy shock to lift price growth to 4.3%, well above its 1% to 3% target band.
The trade-off is sharper because New Zealand’s government scrapped the bank’s full-employment objective in 2023, leaving price stability as the primary mandate ahead of the Nov. 7 election.
Labour said it is seriously considering restoring a dual mandate if elected, while Prime Minister Christopher Luxon’s government argues a single inflation focus is still the best route to growth and jobs.
With polls too close to call, a further rise in joblessness could turn unemployment into a decisive election issue as the economy risks stagflation.