RBNZ Raises Rates, Signals Less Aggressive Tightening Path

The Reserve Bank of New Zealand (RBNZ) increased its official cash rate by 25 basis points to 2.75% on Wednesday, in line with market expectations.

This move marked the second consecutive rate hike and the second increase this year, following a 25-basis-point raise in July. Inflation remains high, standing at 4.1% in the June quarter, largely due to higher fuel prices.

The RBNZ expects inflation to remain elevated this year before returning to its target range of 1-3% by mid-2027 and reaching the midpoint of 2% later next year.

The central bank left the door open for further hikes, saying that conditional on its economic outlook, the cash rate may need to increase further. However, it stressed that the future path is not predetermined and will depend on incoming data and inflation risks.