BNY’s Head of Markets Macro Strategy Bob Savage at notes that the Reserve Bank of New Zealand (RBNZ) kept the Official Cash Rate (OCR) at 2.25% as the Middle East conflict altered the outlook, lifting near‑term inflation risks while weighing on growth. The bank expects weak domestic demand and spare capacity to limit pass‑through but signals readiness to hike if medium‑term inflation expectations or core pressures rise.
Policy on hold but hike discussed
“New Zealand’s central bank held its Official Cash Rate at 2.25%, citing a materially changed outlook following disruptions from the Middle East conflict, which has raised near-term inflation expectations while weakening economic recovery prospects.”
“Despite these risks, weak domestic demand and spare capacity are expected to limit pass-through.”
“The committee judged that holding rates balances the risk of entrenched inflation against unnecessarily constraining growth, while signaling readiness to tighten policy if medium-term inflation expectations rise or core inflation and wage growth fail to remain contained.”
“RBNZ keeps rates on hold at 2.25% but notes a hike was discussed.”
“The role of central bank policy will re-emerge as a key risk.”
