The RBNZ raised rates by 25bp to 2.50% in a unanimous vote, but the MPC split on inflation risks. The next CPI print on July 16 will determine whether the hawks or the balanced-risk camp set the pace for further hikes.
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The Reserve Bank of New Zealand raised the Official Cash Rate by 25 basis points to 2.50% on Wednesday, a decision the Monetary Policy Committee reached by consensus. The unanimity, however, masks a real split on where inflation is heading.
The Record of Meeting showed Prasanna Gai and Hayley Gourley judged risks to inflation as still skewed to the upside. The other four members – Governor Anna Breman, Director of Economics and Chief Economist Paul Conway, Assistant Governor Karen Silk, and external MPC member Carl Hansen – viewed the risks as broadly balanced. Their argument: spare capacity and soft demand should limit how much firms can pass higher costs through to consumers, even as the economy is expected to pick up in the second half of the year.
The split matters for the forward guidance. The statement preserved a tightening bias without locking the Committee into a fixed path. The RBNZ said "some further reduction in monetary stimulus is likely to be required" and that "further OCR increases appear likely at upcoming meetings." It stressed that "their timing is highly uncertain."
The partial reopening of the Strait of Hormuz has sharply reduced oil prices, easing near-term inflation pressures. The Committee acknowledged that but cautioned that "the effects of the shock will linger for some time" and that "the outlook for medium-term inflation pressures remains uncertain."
Future decisions will hinge on incoming data, firms' price-setting behavior, and the pace at which spare capacity is absorbed. The RBNZ is choosing flexibility over explicit forward guidance.
For the New Zealand dollar, the rate decision itself was in line with expectations. The divergence in the MPC's inflation views means the next CPI print carries more weight than usual. A hot number would strengthen the case for the hawks. A soft one would validate the balanced-risk camp and push back against expectations of a follow-up hike.
The next scheduled data point is the Q2 CPI release, due July 16.
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