NZ First Impressions: RBNZ September 2026 Monetary Policy Statement
As expected, the RBNZ hiked the OCR 25 bps to 2.75% at today's meeting. Our forecast remains for a hold in October and a hike in December.
We see this as an appropriately balanced statement. The RBNZ remains resolved to adjust the OCR higher - but for now that looks more like a discussion for December as opposed to a discussion that will necessarily occur in both October and December. A majority of the MPC sees upside risks to inflation which should keep the hike option firmly on the table for the foreseeable future. Nonetheless there remains caution about the strength and breadth of the economy so the MPC will want to see more evidence on the durability of the recovery before committing to a lot more OCR hikes. We will report back again after the press conference with further thoughts. Our current projection of a hold in October and a hike in December remains base case.
Key takeouts from the minutes below.
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Key take outs
| Category | July 2026 | September 2026 |
| The next policy decision | The Committee agreed that while further OCR increases appear likely at upcoming meetings, their timing is highly uncertain. | Future policy will depend on the Committee’s judgement of the balance of risks to medium-term inflation. |
| Future OCR decisions will depend on the Committee’s judgement about how price-setting behaviour and excess productive capacity affect medium-term inflation pressures. | However, the future OCR path is not pre-determined. | |
| The medium term direction for the OCR | With inflation still above target and economic activity expected to strengthen, some further reduction in monetary stimulus is likely to be required to return inflation to the 2 percent target mid-point. | All members agreed that gradually removing monetary stimulus is consistent with achieving the medium-term inflation target, conditional on the outlook. |
| The Committee agreed that it was appropriate to start reducing the degree of monetary stimulus to ensure that inflation returns to target over the medium term. | Conditional on the central economic outlook, members judged that the OCR may need to increase further. | |
| The neutral OCR | The Committee assessed that the current level of the OCR remains accommodative. | |
| However, members noted that there is some uncertainty around where to judge the current level of the neutral interest rate. | ||
| Prasanna Gai noted that recent geoeconomic shocks may have increased New Zealand’s neutral interest rate by reducing global productive capacity and raising investment demand relative to available global savings. | ||
| The strength of economic activity | New Zealand’s economic recovery was underway before the Middle East conflict, but lost momentum in the June quarter as the oil shock weighed on economic activity. | After lacklustre growth in the June quarter, New Zealand's economic recovery has most likely resumed but remains uneven. |
| Growth is expected to resume in the September quarter as these effects fade and confidence improves. | The recovery is expected to strengthen and broaden. | |
| The global economic outlook | Global growth has been resilient to the effects of tariffs and conflict in the Middle East, largely because of strong AI-related investment and spending on defence and economic security. | Despite recent geopolitical events, economic growth in New Zealand’s trading partners has remained resilient and the outlook has improved. |
| Consensus forecasts imply that tradeweighted global inflation will moderate close to 2 percent in 2027. | Although risks to the global economy remain heightened, the Committee expects global economic conditions to remain favourable for New Zealand’s exportfacing businesses over the medium term. | |
| The labour market | Over the medium term, inflation returning to the 2 percent target mid-point will lift household purchasing power and help support a sustained recovery in growth and employment. | Employment growth has not been sufficient to fully absorb new entrants into the labour market and unemployment is elevated, particularly in Auckland and Wellington and for youth and the long-term unemployed. |
| Inflation declining towards the target mid-point will help to ensure a sustainable recovery in economic growth and a stronger labour market. | The labour market is expected to slowly improve, with employment growing and unemployment falling as the economy recovers. | |
| The short term inflation outlook | As a result, near-term inflation pressures have eased. | The Committee expects inflation to remain elevated this year before returning to the target band by mid-2027 and reaching the 2 percent mid-point later next year. |
| Annual headline inflation is expected to have peaked at 3.9 percent in the June 2026 quarter, before declining to 3.3 percent in the September 2026 quarter. | Excluding vehicle fuels, annual CPI inflation decreased to 2.9 percent in the June quarter. | |
| The medium term inflation outlook | Inflation is expected to fall to around 2 percent over the next 12 months. | The Committee is setting monetary policy to return inflation to 2 percent by late 2027. |
| Inflationary pressures in the medium term will depend on price-setting behaviour and the speed at which spare capacity in the economy is absorbed. | Forward-looking indicators of inflation and spare capacity are consistent with achieving the mediumterm target. | |
| The balance of risks for economic growth and inflation | The Committee judged that there are both risks to the upside and the downside. | New Zealand’s economic recovery could be stronger or weaker than expected and price pressures could generate more persistent inflation. |
| In the discussion, Prasanna Gai and Hayley Gourley assessed that risks were skewed to the upside, while Anna Breman, Paul Conway, Carl Hansen and Karen Silk viewed risks as broadly balanced. | All members agreed that downside risks to activity were significant and that the recovery could remain uneven. | |
| Key arguments advanced by more hawkish MPC members in each meeting | Prasanna Gai noted that, despite the recent decline in energy prices, some indirect effects from earlier increases in energy-related input costs may also still flow through to consumer prices. | Hayley Gourley, Karen Silk, Prasanna Gai and Anna Breman saw upside risks to inflation relative to the central projection. |
| Prasanna Gai also highlighted the risk that the Middle East shock could coordinate price-setting behaviour, licencing firms to pass on costs more readily than otherwise. | These members observed that more persistence in energy and petrochemical prices could raise near-term inflation risks, impact price-setting behaviour, and lead to more sticky inflation over the medium term. | |
| These factors increase the risk that monetary policy needs to lean against broader inflation pressures. | ||
| Key arguments advanced by more dovish MPC members in each meeting | Anna Breman noted that if demand remains weak, firms may have less ability to pass higher costs on to consumers and intelligence from recent business engagements point to divergence in ability to pass on cost increases. | Paul Conway and Carl Hansen saw risks to inflation as balanced. |
| Paul Conway noted uncertainty around how quickly the recovery will broaden beyond currently strong sectors and regions. | But weighed against this, they saw activity risks as skewed to the downside and noted that these could weigh on inflation. | |
| They highlighted the potential effects of weak house prices and precautionary behaviour, weakening growth in household spending. |
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