RBNZ Raises Rates, But Dovish Outlook Weighs on NZD

The Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate (OCR) by 25 basis points to 2.75% on Wednesday, but this move was not enough to boost the New Zealand dollar.

The decision comes as annual inflation accelerated to 4.1% in Q2, primarily driven by higher fuel prices linked to the conflict in the Middle East.

However, the RBNZ emphasized that underlying inflationary pressures remain weaker, with core inflation and wage growth consistent with headline inflation returning to the 1-3% target range by mid-2027 and reaching 2% later next year.

The central bank's dovish tone overshadowed the rate hike, as it aims to reduce the risk of more aggressive rate hikes in the future.