{"id":369085,"date":"2026-04-08T06:35:19","date_gmt":"2026-04-08T06:35:19","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/369085\/"},"modified":"2026-04-08T06:35:19","modified_gmt":"2026-04-08T06:35:19","slug":"grim-warning-from-reserve-bank-as-it-braces-for-full-impact-of-oil-shock","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/369085\/","title":{"rendered":"Grim warning from Reserve Bank as it braces for full impact of oil shock"},"content":{"rendered":"The next meeting of the Reserve Bank Monetary Policy Committee (May 27) will include a full statement with updated forecasts and a new rate track.<\/p>\n
In the meantime, with uncertainty about the global outlook still highly uncertain, the RBNZ was content to take a wait-and-see approach.<\/p>\n
\u201cIf medium-term inflation expectations increase, then inflation is likely to become more persistent,\u201d Breman said.<\/p>\n
\u201cHowever, weak demand and spare productive capacity in the economy should constrain the degree to which higher costs can be passed on.\u201d<\/p>\n
Breman noted that financial market conditions had tightened and mortgage rates had increased.<\/p>\n
\u201cThis reduced the further stimulus that we expected in February from borrowers refixing at lower interest rates,\u201d she said.<\/p>\n
Ultimately, the net inflationary effect of the oil shock on the economy is not yet clear.<\/p>\n
\u201cGiven the recency of the conflict, we currently don\u2019t have much data on the likely persistence of higher near-term inflation or how much we expect the reduction in economic growth to be in the near term,\u201d Breman said.<\/p>\n
The February rate track suggested that the rate would stay on hold for most of this year.<\/p>\n
Breman said the possibility of earlier rate hikes was discussed at the latest meeting.<\/p>\n
\u201cSome committee members had suggested that a rate hike in the near term might mean that we don\u2019t have to do so many rate hikes going forward,\u201d Breman said.<\/p>\n
\u201cBut we also discussed the risk that could dampen the weak economic growth that we\u2019re already seeing.<\/p>\n
While Breman emphasised the balancing act, the market and some economists interpreted the discussions as a sign of a more \u201chawkish\u201d tone from the RBNZ.<\/p>\n
\u201cThe statement gave a strong indication that the bank is taking the inflationary risks of supply shocks more seriously than it did five years ago,\u201d Infometrics chief forecaster Gareth Kiernan said.<\/p>\n
\u201cThe bank recognises the downside risks to economic activity from the oil price shock, but it is less convinced that weaker growth will necessarily translate into more well-contained inflation,\u201d he said.<\/p>\n
ANZ\u2019s Sharon Zollner noted: \u201cDownside growth risks got plenty of airtime, but the last paragraph of the policy assessment had a stern tone, which the market read as hawkish.\u201d<\/p>\n
The Monetary Policy Committee was focused on ensuring that inflation returned to the 2% target midpoint over the medium term, the committee statement said.<\/p>\n
\u201cThis requires core inflation and wage growth to remain contained and medium- and long-term inflation expectations to remain around 2%. If these conditions are not met, decisive and timely increases in the OCR [Official Cash Rate] would be required.\u201d<\/p>\n
ASB economists revised their OCR outlook and now expect 25 basis point hikes in September and December, with a 3.25% OCR endpoint by mid-2027.<\/p>\n
\u201cThe RBNZ find themselves in an unenviable position,\u201d ASB senior economist Mark Smith said.<\/p>\n
The global economy has been upended by war in the Middle East, and while uncertainty is elevated and volatility is pronounced, the risk is that the current conflict and associated disruptions drag on for months despite the two-week ceasefire announced today.<\/p>\n
The safest course of action was to wait until more clarity emerged, which is what the RBNZ appeared to have done, Smith said.<\/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":"The next meeting of the Reserve Bank Monetary Policy Committee (May 27) will include a full statement with…\n","protected":false},"author":2,"featured_media":366794,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[102369,5845,806,1643,61233,107418,138,6932,34088,10668,219,2082,71,2070,25807,28489,28162,23500,702,2845,111,139,425,69,1118,5908,4156,19257,10665,13744,1455,6123],"class_list":{"0":"post-369085","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-102369","9":"tag-anna","10":"tag-as","11":"tag-bank","12":"tag-braces","13":"tag-breman","14":"tag-business","15":"tag-cash","16":"tag-delivered","17":"tag-economic","18":"tag-economy","19":"tag-for","20":"tag-from","21":"tag-full","22":"tag-governor","23":"tag-grim","24":"tag-hold","25":"tag-impact","26":"tag-it","27":"tag-leaving","28":"tag-new-zealand","29":"tag-newzealand","30":"tag-now","31":"tag-nz","32":"tag-of","33":"tag-official","34":"tag-oil","35":"tag-rate","36":"tag-reserve","37":"tag-shock","38":"tag-warning","39":"tag-while"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/369085","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=369085"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/369085\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/366794"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=369085"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=369085"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=369085"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}