RBNZ Expected to Hike Rates as Consensus Builds for 25 Basis Point Increase

The Reserve Bank of New Zealand is set to hike interest rates this week, according to ASB's preview. The bank's economics team expects a consensus decision among all six committee voters for a 25 basis point increase in the Official Cash Rate (OCR) to 2.75 percent on Wednesday.

ASB cites three key factors supporting the hike: high inflation above 3%, an OCR still below neutral, and a desire to avoid unnecessary market volatility. The bank notes that the decision is reasonably straightforward, with a full 25 basis point move already close to fully priced by financial markets.

The RBNZ's Monetary Policy Committee will publish its projections, which ASB expects to show inflation falling below 3% by early 2027 and converging towards the 2% target midpoint. The OCR track is likely to signal at least one further 25 basis point hike by year end, with a published peak around 3.3 percent.

ASB's own view is for the OCR to end 2026 at 3.25%, with two-sided risk around that peak depending on how the inflation outlook evolves. The bank flags a more gradual tightening path and lower peak as possible if inflation pressures ease, while a higher peak would be needed if inflation proves more persistent than currently expected.