{"id":469002,"date":"2026-05-27T05:15:08","date_gmt":"2026-05-27T05:15:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/469002\/"},"modified":"2026-05-27T05:15:08","modified_gmt":"2026-05-27T05:15:08","slug":"reserve-bank-makes-split-vote-call-rates-hikes-are-coming-how-far-will-they-go","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/469002\/","title":{"rendered":"Reserve Bank makes split vote call: Rates hikes are coming, how far will they go?"},"content":{"rendered":"These members emphasised that the first round of indirect price increases (caused by the Iran war oil shock) could become more broad-based, feeding through to a greater risk of second-round price increases.<\/p>\n
Commenting on the split vote, Governor Anna Breman said, members were completely free to vote the way they wanted to.<\/p>\n
\u201cEveryone has an individual vote, and everyone has individual accountability for their votes,\u201d she said.<\/p>\n
\u201cWe\u2019re also very pleased that this time we have increased the level of transparency, so there\u2019s more information on the justification for different votes.\u201d<\/p>\n
That vote showed the RBNZ\u2019s position was finely balanced, said ASB chief economist Nick Tuffley.<\/p>\n
\u201cNevertheless, by July we expect the vote to tip in favour of lifting the OCR at that point,\u201d he said.<\/p>\n
\u201cOne risk is leaving the OCR too low for too long, and having inflation take off \u2013 at the cost of having to lift the OCR more aggressively later on.<\/p>\n
\u201cThe other risk is lifting too soon, but while the OCR remains in stimulatory territory, that risk can be mitigated by simply pausing to see how risks pan out.\u201d<\/p>\n
Upwards of three 25-basis-point increases were implied over the rest of 2026, he said.<\/p>\n
BNZ head of research Stephen Toplis moved his forecasts ahead of the RBNZ.<\/p>\n
BNZ is now forecasting a rate hike at every meeting between now and May 2027 \u2013 to take the Official Cash rate to 4%.<\/p>\n
Governor Breman stressed that there were still many possible different paths for monetary policy from here, with war in Iran and oil prices being key variables.<\/p>\n
The central projection was based on the future oil curve from May 21.<\/p>\n
It also presented three alternative scenarios.<\/p>\n
In the first, oil prices stayed higher for longer, and firms and workers passed on higher costs into prices and wages.<\/p>\n
In that scenario, the OCR might need to increase by more than in our central scenario, Breman said.<\/p>\n
The second scenario also assumed that oil prices stayed higher for longer, but that firms and workers absorbed more of the cost and passed on fewer increases.<\/p>\n
Some OCR hikes would still be required to return inflation to target.<\/p>\n
\u201cThis illustrates that it\u2019s not just global factors that will influence the outcome for New Zealand,\u201d Breman said.<\/p>\n
The third scenario assumed the same oil prices as the central projection, but that global demand weakened more.<\/p>\n
That would limit firms\u2019 and workers\u2019 ability to pass on cost increases, and inflation could fall below the target midpoint, Breman said.<\/p>\n
In that scenario, monetary policy might need to be accommodative for longer. In other words, rates could still stay on hold or rise by less than forecast.<\/p>\n
ANZ chief economist Sharon Zollner said the decision confirmed her expectation that the OCR would be lifted 25bp in July, \u201cand very likely in September and October as well\u201d.<\/p>\n
\u201cBeyond that point, while the RBNZ\u2019s current best pick is that they will need to hike once more, to 3.25%, it is very early days,\u201c she said.<\/p>\n
The RBNZ still didn\u2019t have a great deal to work with when it came to assessing the balance of risks around medium-term inflation.<\/p>\n
On balance, given all the global uncertainty, it was a good thing that there was a wide range of estimates in the market about how high the OCR needed to go, Zollner said.<\/p>\n
\u201cGroupthink was an unhelpful feature of the Covid era, and robust debate is healthy. It certainly appears the committee has engaged in that this week!\u201d<\/p>\n
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.<\/p>\n
Stay ahead with the latest market moves, corporate updates, and economic insights by subscribing to our Business newsletter<\/a> \u2013 your essential weekly round-up of all the business news you need.<\/p>\n","protected":false},"excerpt":{"rendered":"These members emphasised that the first round of indirect price increases (caused by the Iran war oil shock)…\n","protected":false},"author":2,"featured_media":469003,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[36601,4671,72,147881,12447,16861,202644,113,61042,38374,113587,42141,11523,61,60,103290,39429,2223,10360,39434,38795,202645,49227,39510,9448],"class_list":["post-469002","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-are","tag-bank","tag-business","tag-call","tag-cash","tag-close","tag-coming","tag-economy","tag-far","tag-go","tag-hikes","tag-hold","tag-how","tag-ie","tag-ireland","tag-makes","tag-official","tag-rate","tag-rates","tag-reserve","tag-split","tag-stayed","tag-they","tag-vote","tag-will"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/469002","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=469002"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/469002\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/469003"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=469002"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=469002"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=469002"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}