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New Zealand Central Bank Hikes Cash Rate by 25 Basis Points to 2.75%

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The Reserve Bank of New Zealand (RBNZ) said its monetary policy committee decided by consensus to hike the official cash rate by 25 basis points to to 2.75% on Wednesday, according to a same-day statement.

Inflation increased to 4.1% in the June quarter on the back of higher fuel prices due to the conflict in the Middle East and inflation is expected to remain above 3% for the remainder of the year, the central bank said, adding that tt is expected to return to the 1% to 3% target band by mid-2027. The committee decided to gradually removing monetary stimulus to return inflation to the 2% target mid-point while supporting growth and employment.

New Zealand's economic recovery has "most likely resumed" but it remains uneven, and the recovery is expected to strengthen and broaden, the bank said.

Resilient demand from trading partners and strong export prices support export-focused sectors and regional New Zealand, but weak income growth, job insecurity, and flat house prices are continuing to weigh on household spending and residential investment, the central bank added.

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