TD Securities reports that the RBNZ kept the OCR at 2.25% in a split decision, with Governor Breman’s casting vote preserving the hold. However, the Monetary Policy Statement and updated OCR track point to a pre-emptive hiking cycle starting in July, with a series of 25 bps moves projected to take the cash rate to 3.25% by February 2027, broadly matching TD’s own forecast path.

Split board but hawkish rate track

"The RBNZ left the OCR at 2.25% at today's MPS meeting but signaled a series of rate hikes is likely at upcoming meetings. The decision to hold was a finely balanced with Governor Breman casting the deciding vote to hold. The deciding vote was required given that three RBNZ Board members voted to keep the cash rate on hold at 2.25% while the three external Board members voted to hike 25bps."

"Indeed, the Summary of the record of meeting notes the Committee discussed the "risks" of higher term inflation feeding through to medium term inflation, but the Board nonetheless flagged it intends to act preemptively to ensure that "…higher costs do not lead to elevated inflation over the medium term, while avoiding unnecessary economic volatility"."

"Looking at the Bank's OCR track, it points to the Bank hiking 25bps at its July and September meetings (taking the cash rate to 2.75%), pausing in Oct and then hiking 25bps at its Dec and Feb'27 meetings taking the cash rate to 3.25%. Our forecast also has the RBNZ taking the cash rate to 3.25% by its Feb'26 meeting, the only difference being the RBNZ signaling a pause in Oct given the earlier start to hikes (Jul) vs our forecast of later start to hikes (Sep) but four consecutive rate hikes to follow."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)