New Zealand Central Bank Surprises Markets With Rate Hold — Update

By James Glynn

SYDNEY--The Reserve Bank of New Zealand held interest rates steady Wednesday, surprising financial markets that had priced in a near-certain hike, but signaled that further increases were likely.

The monetary policy committee voted 4 to 3 to hold the official cash rate steady at 2.75%. Markets had put the probability of a hike at 95%.

"We do think that we will see further OCR increase because of what we are seeing in inflation," Breman told reporters.

The central bank would likely consider another hike in December, when it releases fresh economic forecasts, Breman added. For now, with two rate increases already working through the economy, it has time to assess incoming data and consider its options.

The pause comes as New Zealand's economy shows signs of recovery, though unemployment remains near an 11-year high and growth is uneven.

"In the end, it was a close-run thing. However, some committee members felt it was more prudent to watch how developments unfold over the next six weeks before taking action--with an eye on downside risks to global growth, in particular," said Sharon Zollner, chief economist at ANZ Bank.

Despite the pause, ANZ forecasts three more hikes, in December, February and March, taking the cash rate to 3.5%. Zollner said that level would be needed to head off the risk of persistent inflation.

The New Zealand dollar fell by close to one U.S. cent on the surprise decision before consolidating just above 56.00 cents.

Breman said global risks, including the unresolved war in the Middle East, and fresh inflation data would be critical to the RBNZ decisions in the coming weeks.

She added that November's election wasn't a factor in the decision to hold rates steady. Polls suggest the election will be closely contested.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

October 28, 2026 00:15 ET (04:15 GMT)