The RBNZ’s Monetary Policy Committee decided to raise the official cash rate (OCR) by 25 basis points to 2.50% at its meeting this morning, Wednesday, July 8, as expected, with all six members agreeing. This is the first rate hike since May 2023.

The bank’s statement indicated that following the reopening of the Strait of Hormuz, oil prices have fallen and inflationary pressures have eased in the near term. However, the effects of the energy price shock may persist for some time, and the outlook for medium-term inflationary pressures remains uncertain. The bank stated that monetary policy aims to bring inflation back to its target level.

The bank lowered its near-term inflation forecast to 3.9% for the second quarter and 3.3% for the third quarter, compared to its May estimates of 4.2% for the second quarter and 4.3% for the third quarter.

The bank also lowered its forecasts for the third quarter to 3.9% for the second quarter and 3.3% for the third quarter.

The Bank’s future interest rate decisions will depend on how incoming data, price-setting behavior, and the strength of economic activity affect inflation over the medium term, and the Committee reaffirms its commitment to bringing inflation back toward its medium-term target of 2%.