New Zealand central bank hikes rates again, signals gradual path ahead
New Zealand's central bank raised its key rate by 25 bps to 2.75%, flagging gradual future hikes amid sticky inflation and economic uncertainty.
The Reserve Bank of New Zealand (RBNZ) has increased its official cash rate by 25 basis points to 2.75%, a move that was widely anticipated by markets and economists. The decision marks the second consecutive hike, following a similar increase in July which ended a pause of over three years.
In its accompanying statement, the central bank said that gradually removing monetary stimulus is appropriate to bring inflation back to the 2% target midpoint while still supporting growth and employment. It also noted that the current action reduces the risk of needing larger increases later.
The bank's own projections indicate a modest path forward, with the cash rate expected to reach 2.81% by December and 3.15% by the end of 2027. This suggests a cautious approach rather than aggressive tightening.
New Zealand's economy has shown signs of uneven recovery. While growth picked up in the second half of 2025, it was disrupted by the Middle East conflict and higher fuel prices in early 2026. More recent data, however, point to a rebound in activity during the third quarter.
The RBNZ's inflation forecast has been slightly revised down, with annual inflation now expected to peak at 4.1% in June 2026, compared to a previous projection of 4.3%. The bank also upgraded its growth outlook for the final two quarters of 2026.
This decision aligns with a broader trend among major central banks, including the U.S. Federal Reserve and the European Central Bank, which have adopted a firmer stance as energy costs threaten to keep inflation elevated. The next RBNZ policy announcement is scheduled for October, just days before New Zealand's general election.