RBNZ Sets Sights on December Rate Hike as Market Expectations Shift

The Reserve Bank of New Zealand (RBNZ) has raised its Official Cash Rate for a second consecutive meeting, but investors now expect the next hike to occur in December rather than October.

RBNZ Assistant Governor Karen Silk told Bloomberg that while policymakers are committed to further tightening, they want more time to assess the impact of previous hikes before moving again. The current data track suggests a move at the December meeting is more likely than one in October, with swaps pricing now showing only a 31% probability of a hike at the October meeting.

The RBNZ has also pushed back its inflation timeline, expecting headline inflation to return to the 2% midpoint of its target band by early 2028, later than previously forecast. Silk and three other committee members flagged upside risks to the inflation outlook, citing potential Middle East-driven fuel and freight cost pass-through, firms using the recovery to raise prices, and persistent non-tradable inflation in areas like insurance and electricity.