The RBNZ hikes the OCR by 25bps to 2.50%, as expected; some further reduction in monetary stimulus is likely to be required to return inflation to the 2% target mid-point

• Reached consensus to increase the OCR by 25bps.
• Following the partial reopening of the Strait of Hormuz, global oil prices have fallen markedly. As a result, near-term inflation pressures have eased.
• The effects of the shock will linger for some time and the outlook for medium-term inflation pressures remains uncertain.
• Growth is expected to resume in the September quarter as these effects fade and confidence improves.
• The outlook for medium-term inflation pressures depends on the extent to which recent cost increases feed through into higher prices.
• Future OCR decisions will depend on how incoming data, price-setting behaviour, and the strength of economic activity affect medium-term inflation pressures.

RBNZ Minutes:

• The forecast for near-term inflation has declined, given that current oil futures pricing is now significantly lower than assumed in the May Statement.
• Annual headline inflation is expected to have peaked at 3.9% in the June 2026 quarter, before declining to 3.3% in the September 2026 quarter.
• The Committee judged that there are both risks to the upside and the downside.
• In the discussion, Gai and Gourley assessed that risks were skewed to the upside, while Breman, Conway, Hansen and Silk viewed risks as broadly balanced.
• The Committee discussed risks around domestic price-setting behaviour. All Committee members agreed that this will be a key determinant for the medium-term inflation outlook.
• The Committee assessed that the current level of the OCR remains accommodative.
• While further OCR increases appear likely at upcoming meetings, their timing is highly uncertain.