RBNZ Hikes Cash Rate Again, Signals Further Increases Ahead
The Reserve Bank of New Zealand has raised the official cash rate (OCR) to 2.75% for the second time in a row, as part of its efforts to tackle inflation pressures.
The OCR was increased by 25 basis points, following a similar-sized rise in July. The bank's Monetary Policy Committee said that inflation had surged due to the Middle East war, but excluding fuel prices, annual CPI inflation decreased to 2.9% in the June quarter.
The committee believes that higher fuel prices will drop out of the annual inflation calculation soon, and along with slack in the economy and gradual rises in the OCR, inflation is expected to hit the desired 2% rate by the end of 2027.
New Zealand's economic recovery has likely resumed after being knocked off track by the US-Iran conflict. Strong exports are boosting incomes and investment in parts of the economy and regions, but weak income growth, job insecurity, and flat house prices are weighing on household spending.