FXStreet reported that TD Securities strategist Prashant Newnaha now expects New Zealand’s central bank to raise its policy rate to 3% on Oct. 28, reversing his earlier call for a pause.
The Reserve Bank of New Zealand (RBNZ) raised its Official Cash Rate by 25 basis points to 2.75% on Sept. 2. It said then that its future rate path was not fixed. Newnaha’s revised forecast, as reported by FXStreet, calls for a 25-basis-point increase this month.
Inflation has slowed, though it remains above the RBNZ’s 1% to 3% target range. Stats NZ said consumer prices rose 3.7% over the year through the September quarter, down from 4.1% through June and below the central bank’s earlier 3.9% forecast. Prices increased 0.7% during the quarter, while petrol prices fell 6.5%.
Oil and currency movements present a further challenge for policymakers. In Oct. 22 research, ANZ estimated Dubai crude at about $20 a barrel above the RBNZ’s assumption and said the New Zealand dollar’s trade-weighted index had fallen sharply since September. Westpac put Dubai crude at about $110 a barrel, against the central bank’s December-quarter assumption of about $84.
The RBNZ’s September assessment described different effects on households and exporters. Higher fuel costs reduced households’ real disposable income, while stronger export prices supported income growth and investment in export-exposed sectors. The bank said a higher rate could reduce the risk of elevated prices becoming entrenched, while acknowledging risks to economic activity.
ANZ and Westpac also forecast an October increase, but differ on what follows. ANZ expects a December pause. Westpac forecasts quarter-point increases in December 2026 and February 2027, followed by a peak of 4% later in 2027. Newnaha’s forecast, as reported by FXStreet, includes increases at those two meetings but puts the peak at 3.50%. An earlier ING forecast for an October increase was conditional on inflation data that had yet to be released.
The RBNZ plans to announce its October decision at 9 p.m. ET on Oct. 27 (01:00 UTC Oct. 28). ANZ identified Nov. 4 labor data as an indicator ahead of the bank’s next scheduled decisions on Dec. 9 and Feb. 10, 2027.
