- Decision
- Maintain
- Rate change
- 0 bps
- official cash rate
- 2.25%
The Reserve Bank of New Zealand’s Monetary Policy Committee left the Official Cash Rate (OCR) at 2.25 percent on 18 February 2026, judging that although annual consumer price inflation ticked up to 3.1 percent in the December quarter—just above the 1–3 percent target band—ample spare capacity, subdued wage growth and contained core inflation should bring headline CPI back to the 2 percent midpoint within 12 months as the early-stage recovery firms. The hold follows 150 bp of cumulative easing between February and November 2025, culminating in the November cut to the current level. With the output gap still around –1.5 percent of potential GDP and unemployment at 5.4 percent, GDP nevertheless rose 1.1 percent in Q3 after a 1.0 percent fall in Q2, and investment and manufacturing have begun to broaden the recovery even as weak house prices and cautious households restrain consumption; average mortgage rates stand at 5.1 percent amid a recent uptick in wholesale funding costs. The trade-weighted New Zealand dollar has firmed on relatively higher domestic rates and a softer USD, while strong commodity prices continue to support rural activity. Internationally, AI-driven demand is propping up global growth, but divergent inflation paths, higher oil and precious-metal prices and persistent geopolitical and trade uncertainties keep risks finely balanced. The Committee signalled that monetary policy is set to remain accommodative for some time and will be normalised only once the recovery strengthens and inflation is sustainably at the target midpoint, with incoming data monitored closely.
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.