Central Bank holds rates in April

Latest bank decision: At its meeting on 8 April, the Central Bank decided to hold the Official Cash Rate (OCR) at 2.25%, following total rate cuts of 325 basis points from August 2024 to November 2025.

Elevated inflation motivates pause: The Bank decided to stay put to analyze the effect of previous monetary easing. The decision to not cut further was likely influenced by inflation overshooting the Bank’s 1.0–3.0% target range in Q4—the latest available period of data. Moreover, events in the Middle East are likely to push up price pressures ahead, according to the Bank. In contrast, a rate hike wasn’t yet warranted given that the extent of the impact of war in the Middle East isn’t clear. Moreover, the Bank wished to avoid choking off the economic recovery.

Hike in store later this year: The Bank hinted that its next policy move was likely to be a hike. Most of our panelists expect the Bank to tighten its monetary stance before the end of this year, though several panelists still expect rates to stay on hold and one forecasts a cut.

Panelist insight: On the outlook, United Overseas Bank’s Lee Sue Ann said: “We continue to expect the RBNZ to remain on hold over the coming months as it assesses how the supply shock feeds through against a soft demand backdrop. However, the balance of risks has shifted decisively toward tightening rather than easing, with policy response likely if second-round inflation effects or higher inflation expectations begin to emerge.” ANZ Bank analysts said: “Fair to say it is going to be a highly subjective exercise deciding when the RBNZ should and will start to lift the OCR, but in our view, the balance of risks is shifting towards the Committee deciding that the hurdle has been cleared earlier than December.”

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