- Decision
- Lower
- Rate change
- 25 bps
- official cash rate
- 3%
The Reserve Bank of New Zealand’s Monetary Policy Committee cut the Official Cash Rate by 25 bp to 3.00 percent, judging that stalled Q2 growth, significant spare capacity and easing domestic cost pressures will pull headline CPI—currently 2.7 percent and expected to touch 3.0 percent in the September quarter—back to the 2 percent midpoint of the 1–3 percent target band by mid-2026. This move extends a cumulative 75 bp of easing since February, when the OCR stood at 3.75 percent. The Committee noted that unemployment has risen and wage inflation has slowed, pointing to subdued domestic demand despite ongoing pass-through of earlier rate cuts to lower mortgage and deposit rates. Export commodity prices remain high and the NZD trade-weighted index is broadly stable, cushioning the economy against softer global growth and elevated trade policy uncertainty, which the Committee expects to dampen inflationary pressures. With medium-term inflation judged to be easing, policymakers signalled that “there is scope to lower the OCR further” and said future moves will depend on data on the pace of economic recovery.
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.