- Decision
- Lower
- Rate change
- 25 bps
- official cash rate
- 2.25%
Reserve Bank of New Zealand’s Monetary Policy Committee cut the Official Cash Rate (OCR) by 25 bp to 2.25 percent at its November 26 meeting, citing significant spare capacity, a still-elevated but easing inflation profile—headline CPI hit 3 percent in the September quarter, the top of the 1–3 percent target band but is projected to return to about 2 percent by mid-2026—and a fragile domestic recovery that needs continued support. This marks a cumulative 150 bp of easing since February 2025, when the OCR stood at 3.75 percent. The Committee noted that wholesale rates, mortgage costs and the NZD trade-weighted index have all declined, with the average mortgage rate already down to 5.4 percent and expected to reach 4.7 percent by September 2026, contributing to reduced debt-servicing stress and stabilising labour demand after mid-year weakness. The lower currency is boosting export incomes, while global growth—recently lifted by AI-related investment—is projected to slow in 2026 as trade barriers weigh on activity. Policymakers judged inflation risks as balanced and reiterated that any further OCR moves will hinge on evolving medium-term inflation and economic conditions.
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.