New Zealand’s economy remains highly sensitive to developments in the Middle East, Reserve Bank Governor Anna Breman said, adding that a faster resolution of the conflict could unlock stronger growth this year. After holding the official cash rate at 2.25%, she noted that previous rate cuts are still working their way through the economy, helping to support activity. Combined with solid early-year momentum, this leaves New Zealand well-positioned to benefit if external risks recede.
Recent data showed a pickup in activity in January and February, but Breman said rising tensions weighed on sentiment in March and are expected to drag on April as well. She emphasized that uncertainty remains elevated, with the length and intensity of the conflict the critical variables for the outlook.
In addition to oil prices, broader supply disruptions will heavily influence near-term growth and inflation. A rapid de‑escalation could reduce fuel costs and bolster confidence, while a drawn-out conflict risks prolonging supply strains and keeping inflation elevated. Breman said the RBNZ’s decision to pause reflects this delicate balance, allowing policymakers time to gauge global risks while maintaining a readiness to act if pressures intensify.
