RBNZ sees the cutting cycle as done, but weak consumption and sticky inflation keep risks two-sided.
Summary:
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RBNZ’s Silk says the central scenario is the easing cycle is over, with risks both ways
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Downside risk: weak consumption and a softer household recovery
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Upside risk: sticky inflation, meaning tightening remains possible if pressures persist
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RBNZ says policy needs to stay accommodative for some time to support recovery
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Even with a small hike, Silk notes rates would only be near the lower end of neutral
New Zealand’s central bank is framing policy as “cuts are done, but the outlook is two-sided,” after holding the Official Cash Rate at 2.25% and signalling that settings will remain accommodative for some time as the economy recovers.
In comments following the decision, RBNZ Assistant Governor Karen Silk said the central scenario is that the easing cycle is over, but stressed risks sit on either side of that baseline. The downside risk is that consumption remains weak and the household recovery fails to build momentum, which would argue for keeping policy supportive for longer. The upside risk is that inflation proves sticky, requiring the Bank to lean against price pressures sooner than markets might expect.
Silk’s framing reinforces the message embedded in the RBNZ decision: the policy stance is still accommodative, and officials see value in keeping the OCR track “where it is” to ensure the economy continues closing the output gap. That language is designed to avoid a premature tightening in financial conditions while the recovery remains uneven.
At the same time, the Bank is explicitly reminding markets that “accommodative” does not mean “cut-biased.” Reuters reporting around the meeting notes the RBNZ’s projection track implies some possibility of a hike by year-end, even as the Governor emphasised the Bank is not planning to raise rates until it sees stronger inflationary pressure alongside a firmer economy
