The Reserve Bank of New Zealand raised its official cash rate by 25 basis points to 2.75%, marking a second consecutive increase following July’s move and aligning with market expectations. The decision reflects the Bank’s intention to gradually withdraw monetary stimulus in order to return inflation to the 2% midpoint of its target range, while still supporting economic growth and employment.
Annual inflation rose to 4.1% in Q2 2026, driven largely by higher fuel costs linked to the conflict in the Middle East. However, core inflation, wage growth, and inflation expectations remain consistent with inflation moving back within the 1–3% target band by mid-2027.
After subdued growth in Q2, the economy appears to have resumed its recovery, underpinned by resilient external demand, firm export prices, and increased investment in export-oriented industries. Nonetheless, weak income growth, heightened job insecurity, and stagnant house prices continue to dampen household spending and residential investment. The Committee expects the recovery to strengthen and broaden over time but remains vigilant to the risk that inflation pressures could prove more persistent.
