A widely expected RBNZ hike would reinforce the shift among major central banks toward tighter policy even as the oil price shock that drove inflation higher earlier this year fades. Markets will watch the accompanying statement closely for signals on the pace of further tightening, with a majority of economists already pricing in one more move to 2.75% by September. A no-hike surprise, still seen as plausible given the closeness of the May vote, would likely weigh on the New Zealand dollar and reset near-term rate expectations. Cross-currency positioning may also reflect comparisons with the RBA and ECB, both of which have already tightened this year.
RBNZ set to hike rates 25bps to 2.50% on July 8, first increase in over three years, as inflation at 3.1% stays above target despite oil prices retreating near pre-war levels; more than half of economists see a further hike to 2.75% by September.
Summary:
- RBNZ expected to raise the official cash rate by 25 basis points to 2.50% on July 8, its first hike in more than three years
- 22 of 28 economists polled forecast the hike, while the remaining six expect no change
- Inflation at 3.1% has stayed above the RBNZ’s 1-3% target band since late last year and is not expected to return to range during 2026
- Major local banks are split, with ANZ and BNZ expecting a hike while ASB, Kiwibank and Westpac forecast no change
- 14 of 26 economists expect one further 25bp hike to 2.75% by end-September, with rates then seen holding through 2026 before rising to 3.25% by end-2027
- New Zealand’s economy is forecast to grow 1.7% this year after near-stagnant growth of 0.2% in 2025, accelerating to 2.4% in 2027
New Zealand’s central bank looks poised to raise interest rates for the first time in more than three years, with a Reuters poll showing economists overwhelmingly expect a 25 basis point increase to 2.50% when the Reserve Bank of New Zealand meets on July 8.
Persistent domestic price pressures are driving the expected move, even as global oil prices have retreated to roughly pre-war levels following a partial resumption of shipping traffic through the Strait of Hormuz. Inflation, running at 3.1%, has remained above the RBNZ’s 1 to 3% target band since late last year, and economists surveyed between June 29 and July 3 do not expect it to fall back within range at any point during 2026.
Twenty two of 28 economists in the poll expect the RBNZ to lift the official cash rate to 2.50%, while the remaining six see no change. The case for a hike was strengthened by the closeness of May’s decision, when policymakers left rates on hold only after a split vote forced Governor Anna Breman to cast the deciding vote. Half the committee had wanted a hike at that meeting, and both sides reportedly signalled comfort with at least three increases before the end of the year, a dynamic several economists say leaves the RBNZ little room to hold steady in July without denting its credibility.
Not everyone is convinced the decision is settled. Major local banks are divided, with two expecting a hike and three forecasting no change, and some economists argue the central bank could opt to wait for more data given a thin run of releases over the past six weeks. New Zealand’s economy is expected to have contracted last quarter on the drag from higher fuel costs before rebounding, with growth for the full year pegged at 1.7%, up from just 0.2% in 2025.
Looking further out, more than half the economists polled expect one additional quarter point increase to 2.75% by the end of September, with the cash rate then seen holding through 2026 before climbing another 50 basis points to 3.25% by the end of 2027. That trajectory sits roughly in line with the RBNZ’s own updated terminal rate projection and mirrors a broader hawkish tilt among developed market central banks, several of which have already tightened policy this year in response to the same oil driven inflation shock now beginning to fade.
Source: Original Article
