Financial News: New Zealand Holds Key Rate; Signals Rate Hikes

New Zealand Holds Key Rate; Signals Rate Hikes

(RTTNews) - The Reserve Bank of New Zealand maintained its benchmark interest rate on Wednesday and signaled rate hikes at coming meetings.

The Monetary Policy Committee, governed by Anna Breman, voted to hold the Official Cash Rate at 2.25 percent.

The bank has lowered its benchmark rate by 325 basis points since August 2024, bringing it to the lowest since mid-2022.

"All Committee members agreed that increasing the OCR at upcoming meetings would likely be necessary to ensure higher near-term inflation does not feed through to higher medium-term inflation," the bank said in a statement.

The committee assessed that the balance of risks is to the upside for inflation and to the downside for growth.

Policymakers expect inflation to peak at 4.3 percent by the September quarter and return to the mid-point of the target in mid-2027. Shorter-term inflation expectations increased but medium-to-longer-term expectations remain close to 2 percent.

Further, the committee noted that near-term economic activity is likely to be weaker because of the Middle East conflict. With weaker consumption and investment, the committee expects annual GDP growth in 2026 to be 0.9 percentage points lower than assumed in the February Statement.

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