The Reserve Bank of New Zealand (RBNZ) faced a divided choice on Oct. 28: four members held its cash rate at 2.75%, while three backed an increase amid inflation above target and subdued demand.
Annual consumer price inflation eased to 3.7% in the September quarter from 4.1% in June, the RBNZ said. The bank forecasts a rise to 4.4% in the December quarter, largely because of oil futures prices. Its target band is 1% to 3%, with 2% as the midpoint.
The four members who supported a hold cited the risk that a fragile recovery could lose strength, especially in household consumption and investment. The three who favored a hike backed a 25-basis-point increase to 3%, citing core inflation and the chance that price increases would persist. The committee said it still anticipated a need for tighter policy, with the outlook determining how it proceeded.
The RBNZ said higher fuel and related costs were adding pressure to domestic prices. At the same time, weak spending limited some companies’ ability to pass those costs on to customers.
Reuters said the kiwi touched US$0.55831 on Oct. 28, after falling as much as 1.7%. EconoTimes previously covered the currency’s response to the rate decision. The RBNZ said the currency’s trade-weighted index was about 3% below its level at the September policy statement.
In comments published by FXStreet, Jane Foley, Rabobank’s senior FX strategist, said the outcome diverged from the increase she said markets had anticipated. Reuters’ poll found 22 of 27 economists expected a hike.
New Zealand’s statistics agency Stats NZ reported that GDP expanded 0.2% in the June 2026 quarter, following a revised 0.9% increase in March. The RBNZ said tourism, overseas goods sales and commodity prices were supporting export-facing businesses, while household consumption was weak and employment growth subdued.
The RBNZ has scheduled its next decision for Dec. 9, alongside a new Monetary Policy Statement.
