RBNZ pushes out first OCR cut into 2H 2025

The central bank has also left the door ajar on a potential hike in the OCR later this year.

In its latest monetary policy statement (MPS), RBNZ left its OCR at 5.5% but it is now forecasting that it will peak at 5.7% in the December quarter of this year and raised all its quarterly forecasts thereafter.

In its February MPS, RBNZ had forecast the OCR would be steady at 5.6% through this year and would drop to 5.3% by the June quarter of 2025.

The latest forecasts don't have the OCR falling below 5.5% until the September quarter of 2025 and then only to 5.4%. It expects the OCR to fall to 5.1% by the December quarter of 2025, implying the possibility of two 25 basis point cuts in that quarter.

“Annual consumer price inflation (CPI) is expected to return to within the [monetary policy] committee's 1% to 3% target range by the end of 2024,” the statement said.

“The Welcome decline in inflation in part reflects lower inflation for goods anad services imported into New Zealand,” it said.

But domestically, “higher dwelling rents, insurance costs, council rates, and other domestic services price inflation” poses a risk to inflation expectations, it said.

Insurance costs have risen in reaction to a spate of weather-related disasters and earthquake risks while and council rates in some areas have risen at double-digit rates. The OCR is unlikely to affect either, regardless of its level.

RBNZ's quarterly inflation forecasts have risen slightly in some quarters out to mid-2027 but have remained the same in four of the quarters between now and the end of 2026.

For example, its forecast for the June quarter this year is unchanged from February at 0.6% but its forecast for the September quarter is now 1.3%, up from 1.2% previously while its December quarter forecast is unchanged at 0.4%.

Its forecasts for 2026 are lower in the March quarter at 0.4%, down from 0.5%, the same at 0.4% in the June quarter, but higher at 0.9% in the September quarter, up from 0.8%, and the same at 0.3% in the December quarter.

The central bank's forecasts for the unemployment rate are unchanged through to the end of 2025 when it has it rising slightly to 5.1% compared with its February forecast of 5%.