New Zealand Reserve Bank raises OCR to 2.75%

The Reserve Bank of New Zealand (RBNZ) has unanimously increased the Official Cash Rate (OCR) by 25 basis points to 2.75%. The decision follows annual inflation hitting 4.1% in the June quarter, driven largely by rising fuel prices linked to Middle East conflicts. The Monetary Policy Committee stated that this move is a gradual removal of monetary stimulus intended to return inflation to the 1% to 3% target band by mid-2027.

Economic outlooks remain mixed. While the RBNZ expects a strengthening and broadening recovery supported by resilient exports, the NZIER warns of a fragile recovery with stagnant demand. Critics, including the New Zealand Council of Trade Unions and Retail NZ, have expressed concern that the hike will exacerbate the cost-of-living crisis, impact household spending, and worsen a weak job market where unemployment has reached 5.6%.

Political reactions have also emerged, with the Green Party attributing rising mortgage costs to government policies that increase exposure to imported fossil fuel inflation.