The Reserve Bank of New Zealand kept its official cash rate unchanged at 2.25% at its May meeting, marking a third consecutive hold. The Bank is waiting for clearer evidence on how the global energy shock is influencing domestic demand and the medium-term inflation outlook.
Policymakers observed that higher petrochemical prices are expected to push inflation higher through both direct and indirect channels, with a faster pass-through to business costs but more limited spillovers to the broader economy. While underlying inflation continues to ease, headline inflation is forecast to rise temporarily before gradually returning toward the 2% target in 2027.
The economy remains in the early stages of recovery, with spare capacity and unemployment still elevated. However, higher fuel and input costs are expected to erode household purchasing power and compress business margins, weighing on both consumption and investment.
