- Decision
- Maintain
- Rate change
- 0 bps
- official cash rate
- 3.25%
New Zealand’s Monetary Policy Committee kept the Official Cash Rate (OCR) unchanged at 3.25 percent at its 9 July 2025 review, judging that spare capacity and easing domestic inflation pressures will keep headline CPI—2.5 percent in Q1—within the 1–3 percent target band despite a near-term rise toward its upper edge and a return to about 2 percent by early 2026. After cumulative cuts of 100 bp between February and May 2025, the Committee deemed a pause appropriate while assessing whether weak recent high-frequency activity data, global trade tensions and tariff-driven uncertainty will further temper the fledgling recovery. Financial conditions continue to loosen as mortgage and deposit rates fall on strong bank liquidity and subdued credit demand, with about half of mortgages set to reprice over H2 2025. Elevated export prices and earlier easing should aid growth, but weaker global demand and higher trade barriers threaten to slow the rebound, and rising term premia abroad add to external risks. Conditional on medium-term inflation pressures continuing to moderate, policymakers “expect to lower the OCR further,” leaving the door open to additional easing.
Rate evolution
Over the period, the Reserve Bank of New Zealand lowered the Official Cash Rate (OCR) by a net 50 basis points from 3.25 percent to 2.75 percent, cutting through late 2025 after a July pause, holding in early 2026, then raising the rate in July and September 2026. Early easing reflected declining core inflation, spare capacity, weak demand, and the view that tariffs and global policy uncertainty would restrain growth and medium-term inflation, even as headline inflation neared the top of the 1 to 3 percent band on food and administered prices. As the recovery stalled, the Committee accelerated easing in October before a smaller November cut, while judging risks as broadly balanced between persistent near-term price pressures and weak activity.
The Committee then kept the OCR at 2.25 percent as Middle East supply disruptions lifted fuel and petrochemical costs, raised near-term inflation and weakened activity, before increasing it by 25 basis points to 2.50 percent on July 8, 2026, as activity was expected to strengthen and persistent non-tradables inflation indicated that further stimulus removal would likely be required. On September 2, it raised the OCR by another 25 basis points to 2.75 percent after inflation reached 4.1 percent in the June quarter, largely because of higher fuel and related prices, while judging that core inflation, expected wage growth and inflation expectations remained consistent with inflation returning to target. The Committee said gradually removing monetary stimulus would reduce the risk of larger increases later, and judged that the OCR may need to rise further if the recovery strengthens and price-setting keeps inflation elevated.