RBNZ keeps OCR at 2.25%, as expected, while it stated the OCR will most likely need to increase sooner and by more than envisaged in the February Monetary Policy Statement

• Committee remains focused on ensuring that increased costs do not lead to elevated inflation over the medium term.
• On balance, the OCR will most likely need to increase sooner and by more than envisaged in the February monetary policy statement.
• Pace of OCR increases will depend on the relative influence of persistent wage- and price-setting behaviour versus weaker economic activity on medium-term inflation pressures.
• Middle East conflict is increasing near-term inflation and weakening economic activity.
• Outlook for medium-term inflation pressures is also uncertain.
• Inflation is expected to peak at 4.3% in the September quarter and to return to the 2% target mid-point in mid-2027.
• Weak demand and elevated unemployment will dampen medium-term inflation pressures.
• Currently, core inflation, wage growth, and medium- to long-term inflation expectations remain consistent with inflation returning to the 2-percent target mid-point over the medium term.
• Weak demand and elevated unemployment will dampen medium-term inflation pressures.
• Inflation is expected to peak at 4.3% in the September quarter and to return to the 2% target mid-point in mid-2027.
• Sees OCR at 2.51% in September 2026 (prev. 2.28%).
• Sees OCR at 3.07% in June 2027 (prev. 2.62%).
• Sees OCR at 3.11% in September 2027 (prev. 2.71%).
• Sees OCR at 3.28% in June 2029.
• Sees TWI NZD at around 66.6% in June 2027 (prev. 68.0%).
• Sees annual CPI 2.4% by June 2027 (prev. 2.0%).

RBNZ Minutes:

• Three committee members (Breman, Silk, Conway) voted to leave the OCR on hold and three members (Hansen, Gourley, Gai) voted for a 25bp hike, resulting in the chairperson having the casting vote, meaning the OCR remained on hold at 2.25%.
• Committee remains focused on bringing medium-term inflation back to target and expects that OCR increases will be required this year.
• All committee members agreed that increasing the OCR at upcoming meetings would likely be necessary to ensure higher near-term inflation does not feed through to higher medium-term inflation.
• Pace of OCR increases will depend on the relative influence of persistent wage- and price-setting behaviour versus weaker economic activity on medium-term inflation pressures.