RBNZ keeps OCR at 2.25%, as expected, while it stated the OCR will most likely need to increase sooner and by more than envisaged in the February Monetary Policy Statement

Committee remains focused on ensuring that increased costs do not lead to elevated inflation over the medium term. On balance, the OCR will most likely need to increase sooner and by more than envisaged in the February monetary policy statement. Pace of OCR increases will depend on the relative influence of persistent wage- and price-setting behaviour versus weaker economic activity on medium-term inflation pressures. Middle East conflict is increasing near-term inflation and weakening economic activity. Outlook for medium-term inflation pressures is also uncertain. Inflation is expected to peak at 4.3% in the September quarter and to return to the 2% target mid-point in mid-2027. Weak demand and elevated unemployment will dampen medium-term inflation pressures. Currently, core inflation, wage growth, and medium- to long-term inflation expectations remain consistent with inflation returning to the 2-percent target mid-point over the medium term. Weak demand and elevated unemployment will dampen medium-term inflation pressures. Inflation is expected to peak at 4.3% in the September quarter and to return to the 2% target mid-point in mid-2027. Sees OCR at 2.51% in September 2026 (prev. 2.28%). Sees OCR at 3.07% in June 2027 (prev. 2.62%). Sees OCR at 3.11% in September 2027 (prev. 2.71%). Sees OCR at 3.28% in June 2029. Sees TWI NZD at around 66.6% in June 2027 (prev. 68.0%). Sees annual CPI 2.4% by June 2027 (prev. 2.0%). RBNZ Minutes: Three committee members (Breman, Silk, Conway) voted to leave the OCR on hold and three members (Hansen, Gourley, Gai) voted for a 25bp hike, resulting in the chairperson having the casting vote, meaning the OCR remained on hold at 2.25%. Committee remains focused on bringing medium-term inflation back to target and expects that OCR increases will be required this year. All committee members agreed that increasing the OCR at upcoming meetings would likely be necessary to ensure higher near-term inflation does not feed through to higher medium-term inflation. Pace of OCR increases will depend on the relative influence of persistent wage- and price-setting behaviour versus weaker economic activity on medium-term inflation pressures.