RBNZ Review: 25bps Hike But Unknown Next
RBNZ hike rate by 25bps to 2.5% unanimously
The RBNZ hike rates by 25bps to 2.5% in the July meeting unanimously. It is a decisive shift from May's split hold and led the RBNZ into its tightening cycle. Forward guidance sound hawkish but clearly indicates uncertainty ahead.
Some key takeaways:
Inflation Forecast to Have Peaked: The RBNZ forecast headline inflation to have peaked at 3.9% in June 2026. They expect headline moderation to 3.3% in September 2026 before returning to target range in the second half of 2027. Governor Breman may have spoken too soon as we heard U.S.-Iran exchanging fire and broken the fragile truce already.
Hawkish But Uncertainty Outlook: They clearly indicated their trajectory to move rates to neutral, ranging from 2.5-3.5%. Without any Middle East certainty, there is no meaningful OCR forecast. But with energy prices currently lower, the next spike in CPI (if any from full blown Middle East war again) will likely come in months rather than weeks. It could see the next hike only close to Q4 2026.