RBNZ Set For A Hawkish Decision, As “One Step Toward Policy Normalisation”
- RBNZ seen hiking a quarter point to 2.50%
- NZIER Shadow Board split on hold vs hike
- OCR expected to reach its neutral rate within a year
- US-Iran war spillovers are key to the decision
- Decision due Wednesday, at 02:00 GMT
By Harry Daniels/Evie Cummins
LiveSquawk News
07 July 2025 | 13:00 GMT
The Reserve Bank of New Zealand (RBNZ) heads into this week's Monetary Policy Review to decide on the Official Cash Rate (OCR), which is generally expected to be a hike of 25bps.
Analysts at TD Securities hold their call on a 25 basis points (bps) hike in July, conceding that the RBNZ may hike rates slower than forecast in April. However, they flagged that the hike may still leave monetary policy too accommodative, as GDP/inflation outcomes have tracked “well above Bank forecasts” since the 75bps cuts in October and November last year.
Similarly, HSBC Economist Maitreyi Das noted that recent economic data have pointd to stronger-than-expected growth and firmer inflation. While GDP growth is expected to moderate in Q2, HSBC anticipates economic activity to recover by the second half of the year supported by developments following the recent US-Iran conflict. As a result, the bank forecasts a 25bp rate hike, describing it as “one step towards policy normalisation.”
NZIER's Shadow Board
While market consensus points to a hike, the New Zealand Institute of Economic Research (NZIER)’s Monetary Policy Shadow Board hold mixed opinions, recommending a hold in July, with its nine members split almost evenly: 5 favouring a hike and 4 backing a hold. The board described the decision as a line-ball.
Those favouring an immediate move cite rising inflation. BNZ’s Head of Research, Stephen Toplis, said the RBNZ should avoid adding to price pressures and lift rates to neutral “as soon as possible.” While Victoria University of Wellington’s Viv Hall stated that CPI and core inflation remain above the target 1-3% band, arguing the OCR should move “progressively towards neutral”. BusinessNZ’s John Pask expected these inflationary pressures to remain elevated for some time, despite recent progress in the US-Iran war.
Those backing a hold see the war’s secondary effects as temporary. Kiwibank’s Jarrod Kerr said: “The oil price went up, demand was destroyed, and now the price has fallen back down. The impact on prices across the economy should be temporary as well.” Westpac’s Kelly Eckhold said the urgency to raise the OCR has eased, but he is watching June-quarter CPI data and may revise his view before the September meeting. University of Otago’s Dennis Wesselbaum pointed to “subdued” GDP growth, stating that keeping the rate stable “one more time” seems “reasonable.”
Despite mixed views over July’s meeting outcome, the Shadow Board mostly agreed that the OCR should increase over the coming year to a neutral range of 3.00-3.25%. Sharesies’ Brooke Roberts said a 25bps hike, followed by gradual increases over the years, provides “the right balance between controlling inflation and supporting the economy.”
Looking Ahead
If the decision is a hold, it is likely to be accompanied by hawkish guidance, with markets should treat it as a postponement rather than an end to the tightening cycle. As such, upcoming data will be key in creating a clearer picture for secondary effects of the war on New Zealand’s economy. In particular, core CPI, inflation expectations, and labour market data are expected to play a pivotal role in shaping the RBNZ’s policy decisions over the coming months.
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- RBNZ seen hiking a quarter point to 2.50%
- NZIER Shadow Board split on hold vs hike
- OCR expected to reach its neutral rate within a year
- US-Iran war spillovers are key to the decision
- Decision due Wednesday, at 02:00 GMT
By Harry Daniels/Evie Cummins
LiveSquawk News
07 July 2025 | 13:00 GMT
The Reserve Bank of New Zealand (RBNZ) heads into this week's Monetary Policy Review to decide on the Official Cash Rate (OCR), which is generally expected to be a hike of 25bps.
Analysts at TD Securities hold their call on a 25 basis points (bps) hike in July, conceding that the RBNZ may hike rates slower than forecast in April. However, they flagged that the hike may still leave monetary policy too accommodative, as GDP/inflation outcomes have tracked “well above Bank forecasts” since the 75bps cuts in October and November last year.
Similarly, HSBC Economist Maitreyi Das noted that recent economic data have pointd to stronger-than-expected growth and firmer inflation. While GDP growth is expected to moderate in Q2, HSBC anticipates economic activity to recover by the second half of the year supported by developments following the recent US-Iran conflict. As a result, the bank forecasts a 25bp rate hike, describing it as “one step towards policy normalisation.”
While market consensus points to a hike, the New Zealand Institute of Economic Research (NZIER)’s Monetary Policy Shadow Board hold mixed opinions, recommending a hold in July, with its nine members split almost evenly: 5 favouring a hike and 4 backing a hold. The board described the decision as a line-ball.
Those favouring an immediate move cite rising inflation. BNZ’s Head of Research, Stephen Toplis, said the RBNZ should avoid adding to price pressures and lift rates to neutral “as soon as possible.” While Victoria University of Wellington’s Viv Hall stated that CPI and core inflation remain above the target 1-3% band, arguing the OCR should move “progressively towards neutral”. BusinessNZ’s John Pask expected these inflationary pressures to remain elevated for some time, despite recent progress in the US-Iran war.
Those backing a hold see the war’s secondary effects as temporary. Kiwibank’s Jarrod Kerr said: “The oil price went up, demand was destroyed, and now the price has fallen back down. The impact on prices across the economy should be temporary as well.” Westpac’s Kelly Eckhold said the urgency to raise the OCR has eased, but he is watching June-quarter CPI data and may revise his view before the September meeting. University of Otago’s Dennis Wesselbaum pointed to “subdued” GDP growth, stating that keeping the rate stable “one more time” seems “reasonable.”
Despite mixed views over July’s meeting outcome, the Shadow Board mostly agreed that the OCR should increase over the coming year to a neutral range of 3.00-3.25%. Sharesies’ Brooke Roberts said a 25bps hike, followed by gradual increases over the years, provides “the right balance between controlling inflation and supporting the economy.”
If the decision is a hold, it is likely to be accompanied by hawkish guidance, with markets should treat it as a postponement rather than an end to the tightening cycle. As such, upcoming data will be key in creating a clearer picture for secondary effects of the war on New Zealand’s economy. In particular, core CPI, inflation expectations, and labour market data are expected to play a pivotal role in shaping the RBNZ’s policy decisions over the coming months.