The RBNZ projects lower OCR levels through 2026, sees inflation returning to target by mid-2026, and highlights spare capacity, stalled growth, and cautious behavior as downside risks.
STATEMENT:
RBNZ sees the OCR at 2.71% in December 2025 (previously 2.92%).
OCR projected at 2.59% in September 2026 (previously 2.9%).
OCR projected at 2.62% in December 2026 (previously 2.94%).
OCR projected at 2.85% in September 2028.
Annual CPI expected at 2.2% by September 2026 (previously 2.1%).
Trade-weighted NZD seen at 68.0% in September 2026 (previously 69.0%).
RBNZ said if medium-term inflation pressures continue to ease as expected, there is scope to lower the OCR further.
Statement noted spare capacity in the economy and declining domestic inflation pressure, with headline inflation expected to return to the 2% midpoint by mid-2026.
New Zealand’s economic recovery stalled in Q2 of this year.
The RBNZ highlighted both upside and downside risks to the economic outlook.
It warned cautious household and business behavior could dampen growth further.
Alternatively, recovery could accelerate as the effects of rate cuts flow through the economy.
MINUTES:
By a majority of 4 votes to 2, the committee agreed to decrease the OCR by 25bp to 3%.
On 20 August, the committee voted on reducing the OCR by either 25bp or 50bp.
The case for a 25bp cut was based on upside and downside risks being broadly balanced.
The committee expects to lower the OCR further if medium-term inflation pressures ease as projected.
Cutting 25bp now allows incremental adjustment in response to new information.
The case for a 50bp cut emphasized declining inflationary pressure and significant spare capacity.
Some members stressed the risk that global policy uncertainty could persistently weigh on domestic consumption and investment.
Inflation is projected to rise to 3% in the September quarter, with a material possibility it rises above the target band.
A larger cut might have disrupted that dynamic and provided clearer positive signals for consumption and investment.
The committee discussed three policy options: holding the OCR at 3.25%, cutting by 25bp to 3%, or cutting by 50bp to 2.75%.
